Clearing Up An Insurance Commission Misconception

BAY COUNTY, FL – It would seem that most people understand insurance agents do not receive 80% of the premiums they collect. However, I see ads all the time, particularly on social media, claiming insurance is so expensive because most of the money goes to insurance agent commissions. If this were true, I’d be dictating this article to my secretary from the fantail of my new yacht anchored somewhere in the Caribbean.

People say: “But, hey, I read it on the Internet, so it MUST be true!” And, there’s even one particularly compelling ad that claims to be footage from Shark Tank. 

Not only is this claim ridiculous, it’s also very misleading. For example, agents who sell home, auto, and commercial insurance earn an average commission of about 10%. Some may have a point more or less, and some specific types of insurance (like bonds or flood insurance) might have different rates; however, I assure you, commissions are nowhere near 80%. 

Consider this: If agents were most of the cost, wouldn’t online companies be able to sell policies for 80% less than I can? Of course, they would, and they’d put me quickly out of business. Quite frankly, I believe most agents would be perfectly willing to show you the exact amount they were paid in commission for your policy. 

So, what’s happening here? Certain kinds of life insurance do pay agents a relatively high commission up front, but then they never pay commission again. A life insurance policy may be in force for 20 years or more, and premiums are paid every year; however, after that first year, the agent usually gets nothing. Shady salespeople use this information to claim that every agent gets 80% of your policy premiums, even though they know it’s not true. 

The proof is very easy to locate. If you are interested, simply click on one of those ads and see what their premium is. The amount might be a little cheaper, but then again, it might not. Either way, you have just given a bunch of your personal data to some random company on the Internet, so be prepared for the result. Better yet, simply talk to your local agent, someone you know, and ask outright: “What do you make for handling my policy. And, what do you do to earn it?” Finally, I trust this misconception has been cleared up. P.S.: Please don’t believe everything you read on the Internet!