As a consumer, it is very important that you are aware of everything you are paying for when you purchase an auto insurance policy.
The reality is that when you buy an auto insurance policy, you’re not just buying the coverage and policy itself, you’re also paying your agent’s commission. This is nothing new in the insurance industry, but it is a fact that few consumers think they probably should.
Reading: How much commission do auto insurance agents make
Understanding the average commission an agent receives, how it’s paid, and the impact it has on your policy premium can help you better shop around for maximum value.
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How is an agent’s commission calculated?
The commission you earn as an agent selling consumer auto insurance is based directly on the direct premium written for that policy.
That means if you sell a $1,500 auto insurance policy and the agreed commission on that policy is 10 percent, then the commission the agent gets is $150.
While the actual formula for how the commission is calculated seems simple, things can get complicated when it comes to the role an agent plays. An agent wants to sell her an insurance policy, but at the same time he is also looking out for her own interest.
When shopping as independent agents, they may be more inclined to promote policies that offer them a higher commission rate. It’s important to keep this in mind when shopping for auto insurance.
Note that agents earn commissions differently depending on the type of insurance they sell. For example, a health insurance agent earns a high commission when selling a policy and a lower commission later when the policy is renewed.
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Life and auto insurance agents are typically paid a lower commission on the initial sale of the life or auto policy and higher commissions upon renewal.
what are the average commission rates?
The average commission rates that exist today range from 5 to 20 percent. very few auto insurance agents get as much as 20 percent, and most will take a commission of around 10 percent, as we estimated earlier in our sample calculation. different companies have different commission structures.
The commission an insurance agent gets for a new commercial policy compared to a renewal can also vary.
Usually more commission is paid when an agent sells a new business. When it’s time to renew the policy, they’ll get another commission for the direct written renewal premium, but it’s usually lower than the initial commission.
According to the Bureau of Labor Statistics, the average auto insurance agent earns an average salary of about $50,000 per year. Salary satisfaction for insurance agents across the country is around 45%.
however, salaries vary depending on the company and the skills of the individual agent.
what are the different types of agents?
The two most common types of insurance agents you will come across are independent insurance agents and captive insurance agents. they are very different and it is important to take them into account when comparing insurance prices.
Captive agents are exclusive to a single insurance company. That means if you’re a captive agent, you’re contracted with a single provider, selling only that provider’s insurance policies to clients. potentials.
An independent agent can sell policies from any insurance company in the market. As a consumer, an independent agent will be better able to compare purchases between various insurance companies and policies. what they are offering. the term insurance broker is also used to describe this position. An independent insurance or insurance broker works for you, not the insurance company.
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Independent agents typically earn a percentage of the first year’s premium as a commission on an insurance policy.
An independent broker or agent can also help you with insurance claims, and you’ll know they have your best interests in mind, not those of the insurance provider.
why should consumers care about insurance fees?
So why should you, as a consumer, pay attention to an insurance policy’s commission rate? The reason is that it will have an impact on the direct written premium you are paying for that policy.
If the insurance agent you’re working with asks for a 15 percent commission from all the insurance companies you get quotes from, those premium quotes will be on the high end across the board.
Essentially, you should compare store agents just as you would an insurance company and a policy.
When you have two insurance agents, one asks for a 10 percent commission and the other asks for a 15 percent commission, chances are when you go shopping, one will come back with quotes of around five percent. less than the other will.
This can lead to more value for your insurance policy and lower premiums.
what is the end result?
The world of insurance is complex for all consumers. you do your best to pay attention to everything from the coverage you’re buying to deductibles, while staying focused on the actual premium you’re paying for that product.
Commission puts a whole new spin on the game, but if you pay attention to it, it can help you get more value out of your insurance policy from day one and beyond, as it renews annually.
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See also: GAP Insurance Policies: Can They be Renewed? | ALA Insights