How does life insurance agent earn if no commission comes from insurance company?

Currently, in India, the premium charged from client for life insurance policies includes the commissions that the agent will receive from the insurance company.
New scenario is developing: Life insurance companies will not give any comission to agents but the agent will charge a fee.
Any one has clarity how this works in other countries:
1) What kind of fee is charged by agent
2) Is the fee disclosed to client
3) What about subsequent years earnings
4) Does the insurance agent come under service tax this way

3 Replies to “How does life insurance agent earn if no commission comes from insurance company?”

  1. Sure…successful agents make a good living, but it seems as if they want to punish the industry for the 10% of the folks that become successful. Most people can’t make a living here anyway so they want to make it even more difficult? That makes no sense. If you can’t make a living then WHO is going to be there to explain their options and give them advice?

    I have no idea how this works in other countries and I hope I never find out.

  2. None of the life insurance covers of any company with money back or growth plans is good. The reason is that the commissions of the agents are very high. Basically is a matter of educating insured and he will never buy an insurance product. In that case there will be no insurance agents. So it better that number of insurance agents is reduced gradually over a period of time by asking them to charge fee from clients for rendering the service. In that case they will also be disclosing their fee and also professionally responsible for mis-informing the insured which happens in every case.

    In USA 90% of the insurance business is in term policies and rest 10% is in growth and investment plans. Similar scence will be there in India as well in next 4-5 years that is the target of the govt.

    As per IRDA rules it is mandatory for an insurance agent to disclose the commission that he is earning on a policy if asked. But Indians are usually to shy to ask such questions. And IRDA is too shy to make important changes. They could make it mandatory by writing on the policy document the amount of commission that will be payable to the insurance agents. But the intention is to allow the insurance agents to cheat insured for some more years

  3. 1) This would be a fee for service senario much like investment advisors, where they will charge you X amount of money per hour for consultation services, whether you buy or not. Just like a lawyer charges you whether you win or not, or whether it even goes to court.

    2) I would assume this would have to be legally disclosed to the client before any services are rendered.

    3) There would be none. No residual income…if you provide good service/advice they will come back…that’s your future earnings.

    4) Depends on your local laws on whether it would fall under good and services taxes or just under a flat income tax fee. Would likely depend on whether it’s an incorporated individual or a person in an independent self-employed advisor role.

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