How much commissions do insurance agents earn?



A commencement allowance of $675,000 +

An initial monthly salary of $65,625 +

A salary of $43,750 for the next 12 months.

In other words, we can look at this as a $4 million annual paycheck that was given out.







Many had a lot to say about the absurdly high pay.



Credits: The Straits Times Singapore Facebook page

The key question I had after reading the news article was:



Was the agents’ focus on regular premium policies self-motivated?

"The Ramesh Organisation had focused predominantly on regular premium policies instead of single premium policies since the beginning of 2010. (Regular premium policies are those for which the policyholder pays premiums throughout the life of the policy, while single premium policies are those where, as the name suggests, the policyholder pays one premium at the start of the period of cover.) On this assurance, the Ramesh Organisation had focused on regular premium products." Source The persistency ratio for single premium policies tends to be more volatile as policyholders will typically cash out these policies to realise the profit when market conditions are favourable. Ramesh asserts that the CEO then, Mr Gilbert Pak, had assured him in February 2010 that they was agreeable to taking into account only the persistency ratio in respect of regular premium policies when assessing the eligibility of Ramesh Organisation advisers for incentives and awards in the event that their persistency ratio in respect of single premium products dropped as a result of the organisation’s shift in focus.

the agents’ motivation to sell regular premium policies were not purely based on their customers’ needs anymore, but also because they wanted to increase their persistency ratio? It sounded like this to me leh?



(The persistency ratio is a key assessment criteria of an agent’s performance in running for the bonus awards and incentives given to top performers.) Doesn’t this sound likeregular premium policies wereanymore, but also? It sounded like this to me leh?





Letter from AXA’s CEO Glenn Williams

High Number of Lapsed / Surrendered Policies



"Based on our observations of notable trends [on] the lapsing and surrendering of policies, we have strong reason to believe that the ex-advisers in [the] Ramesh Organisation have been involved in [the] twisting of clients’ policies. We are very concerned as to whether the clients have been provided with proper advice or [whether] any improper switching/replacement practices [have been] carried out by the ex-advisers which are detrimental to [the] clients’ interests."

(“Twisting” is a term used to describe the situation where a policyholder is persuaded to allow an existing policy to lapse, only to enter into a new policy on similar terms.)



"Twisting" hurts the consumer but is a sweet deal for the agent who stands to earn the commissions all over again. However, it is unclear from the judgment if any evidence was found thereafter to support AXA's claim that the agent had indeed practised "twisting", and probably only the agents themselves will have the answer.



Source: The Straits Times

The next question we're all wondering is, how much do financial advisors stand to earn from selling us insurance?





Coupled with the ongoing debate over term and life insurance, ma

ny financial bloggers advocate

Buy Term and Invest the Rest (BTIR)

, whereas insurance agents cry out that you should be getting

Whole Life (WL) Insurance

instead. Recently, there was even a rather contentious article put out (by an insurance agent, unsurprisingly) to argue in favour of whole life policies.





Who's right and who's wrong? That's a topic for another day, but in the meantime, you can read my previous posts on this debate here and here

One common argument raised by BTIR advocates is that insurance agents are pushing for WL because it lines their pockets with hefty commissions.





Is that true? How much does your insurance agent stand to gain if he sells you a whole life policy instead of term insurance?





Let's take a look.





Someone managed to get a copy of the Agency Schedule of Commissions from one of the major insurance companies in Singapore, which I've reproduced below and will be using for the purpose of this article.







As you can see from the commission table above, whole life insurance, endowment and investment-linked policies (ILPs) have the highest commission rates.



Read why I cancelled my ILP here.



Let's look at two insurance agents - one who advocates BTIR, and another who promotes WL.