Individual insurance agents were paid on average 27% of first-year premium across all life products in FY 2024-25, according to IRDAI data published in September 2026. Across all sellers that year, first-year commission averaged 37% on participating savings plans and 51% on term plans, against 2% to 6% of each later premium. On a ₹1,00,000-a-year participating (traditional) plan, that comes to roughly ₹27,000 to ₹37,000 in year one, with renewals near ₹6,000 a year.
How are insurance agents paid commission?
The insurer pays the seller out of your premium. Since 1 April 2023, IRDAI no longer fixes a commission rate for each product. Each insurer sets its own rates in a board-approved commission policy, and the only regulatory limit is on the insurer's total expenses of management, which cover commission and running costs together. The IRDAI (Expenses of Management, including Commission, of Insurers) Regulations, 2024 kept that structure from 1 April 2024.
So no rule sets insurance agent commission on a given plan; IRDAI's consultation paper of 23 September 2026 counts what insurers actually paid. Its FY 2024-25 averages cover every seller except direct and online sales, include rewards and incentives, and put first-year commission at 6 to 13 times renewal commission. By channel, in FY 2024-25, brokers averaged 43% of first-year premium and corporate agents other than banks and NBFCs 61%.
Mutual fund distributors differ: SEBI has barred most upfront commission since October 2018, so they earn mainly a yearly trail from the scheme's expense ratio; trail commission covers it.
Pranav's ₹1,00,000 plan: what the seller earns in year one
Pranav, 32, earns ₹30 lakh CTC, about ₹1,81,400 a month in hand with PF on full wages. He is pitched a participating endowment plan: ₹1,00,000 a year for 15 years, with ₹10 lakh of life cover. At the FY 2024-25 averages for such plans, across all sellers:
- Year one: 37% of ₹1,00,000 = ₹37,000
- Years 2 to 15: 6% of ₹1,00,000 = ₹6,000 a year, ₹84,000 over 14 renewals
- Total: ₹1,21,000, about 8% of the ₹15,00,000 he would pay
Almost a third of the seller's 15 years of commission arrives with the first cheque. Individual agents averaged 27% in FY 2024-25 across all products, ULIPs included, or ₹27,000 here; IRDAI does not split the agent figure by plan type.
Pranav also needs about ₹3.5 crore of life cover, which the insurance planning guide prices at about ₹32,000 a year for a ₹30 lakh earner aged 32 (indicative, 2026). At the FY 2024-25 term average of 51%, on a policy running to age 60, the seller earns ₹16,320 in year one and ₹1,280 a year after it: 4% of ₹32,000 for 27 renewals is ₹34,560, so ₹50,880 over 28 years of premiums. The term plan pays the higher rate but less than half the rupees in year one, while carrying 35 times the cover. The rupees, not the rate, make the savings plan the easier pitch.
Why does a term plan pay less in rupees?
Commission is a share of the premium, and term premiums are small. At the FY 2024-25 all-seller averages:
| Plan, yearly premium | First-year rate | Year one | Renewal rate | Each renewal |
|---|---|---|---|---|
| Participating plan, ₹1,00,000 | 37% | ₹37,000 | 6% | ₹6,000 |
| Non-participating plan, ₹1,00,000 | 25% | ₹25,000 | 3% | ₹3,000 |
| ULIP, ₹1,00,000 | 14% | ₹14,000 | 2% | ₹2,000 |
| Term plan for ₹3.5 crore, ₹32,000 | 51% | ₹16,320 | 4% | ₹1,280 |
A seller paid heavily up front gains most from a large first premium, far less from each renewal. IRDAI's paper ties this to mis-selling and short policy lives, and proposes clawing commission back where a policy was mis-sold. Endowment policy vs term insurance works out what the endowment's premium buys in return.
What would IRDAI's 2026 proposal change?
The paper proposes bringing back per-policy caps, with every reward and incentive counted as commission. For an individual agent on a savings plan or ULIP with premiums paid for 10 years or more, the cap would be 25% of first-year premium and 5% on renewals, rising by half a point every three years from the sixth policy year to at most 7%, with first-year caps of 27.5% to 30% in towns and cities under 10 lakh people and rural areas. Regular-premium term plans would be capped at 30% and 10%. Distribution entities, such as banks and brokers, would be capped lower, at 20% and 3% on savings plans.
If an individual agent in a large city sells Pranav's plan, year one could pay at most ₹25,000, against ₹27,000 at the FY 2024-25 agent average across products and ₹37,000 at the all-seller average. On the term plan, year one could pay at most ₹9,600, against the ₹16,320 all-seller average, and each renewal at most ₹3,200, against ₹1,280. IRDAI set 25 October 2026 as the last date for comments; until final regulations follow, nothing changes.
How do you find out what your agent earns?
Ask the seller, in writing, what the policy pays in year one and after, rewards included. The paper proposes that every insurer publish its board-approved commission policy on its website in a simple form. If the pitch comes at a bank branch, why your bank RM keeps selling insurance explains the targets.
Dhi looks at your protection, cash flow, net worth and goals together, and answers questions about a policy you are offered, from your own numbers. Dhi earns no commission on any policy and never mis-sells.
Frequently asked questions
This is general information for salaried individuals in India, not personalised financial advice.
