A former insurance producer, Laura understands that education is key when it comes to buying insurance. She has happily dedicated many hours to helping her clients understand how the insurance marketplace works so they can find the best car, home, and life insurance products for their needs.

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Leslie Kasperowicz holds a BA in Social Sciences from the University of Winnipeg. She spent several years as a Farmers Insurance CSR, gaining a solid understanding of insurance products, including home, life, auto, and commercial, and working directly with insurance customers to understand their needs. She has since used that knowledge in her more than ten years as a writer, mainly in the insuranc...

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Reviewed by Leslie Kasperowicz
Farmers Insurance CSR 4 Years

UPDATED: Oct 18, 2021

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  • Car insurance agents are licensed to help recommend coverage options and sell consumers property and casualty insurance products
  • Some agents are compensated with a salary, and others have commission-based earnings
  • Exclusive agents who operate their own agencies will typically earn a commission for selling an insurance product and then another commission at each renewal
  • Commissions paid to agents vary based on the company, but they range between two and fifteen percent of the total policy premium
  • The average salary of an auto insurance agent as reported by the Bureau of Labor Statistics is $47,860 per year
  • Brokers who are licensed to sell products with several different companies and may charge a brokerage fee in addition to the commissions that are paid by the carrier

Car insurance agents are financial service professionals who’re licensed to sell property and casualty insurance products to property owners in one or several states. While agents are required to pass an ethics course before selling insurance, their mission to match a prospective client to a product that they sell is driven by the fact that their sales directly affect their income. As agents, they are salespeople whose performance is measured and whose income is dependent on their performance and what service they provide to their customers.

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When you’re shopping for auto insurance, you’re so focused on finding a competitively priced product that you might not think about how the agent you’re speaking with is paid. Naturally, you want an experienced agent, but you don’t necessarily know what that means, how they earn their income, or what an average commission would be. Because an agent’s compensation can affect how much you’ll pay out-of-pocket, you must do your research. Find out not just how agents are paid but which types of agents are permitted by law to charge you a fee for their services.

What’s an exclusive agent?

There’s more than one type of insurance agent. An exclusive agent is one of the most popular types that you’ll come across when you’re contacting a company directly. An exclusive agent, which may also be referred to as a captive agent, is a professional who represents one insurance company or group. The professional represents the company and may only promote and sell products for the company they represent in their agency.

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What’s an independent agent?

An independent agent can represent several dozen insurance companies at a single time. They represent the insurance companies that they promote but aren’t employed by these companies. Because of this, they produce their marketing materials and manage their business operations. As a result, consumers who do business with independent agents can compare the rates with multiple carriers. Still, it’s possible that the professional could push products from carriers that offer them higher commission rates. The rate of commission that an agent receives is their livelihood, so it matters.

What’s an insurance broker?

An insurance broker is very similar to an independent agent, but an insurance company doesn’t appoint the broker. Like independents, brokers sell products available through several different carriers.

The main difference is that the broker represents the customer instead of the insurer.

They will sit down with clients, discuss their needs, and then choose a company based on the consumer’s preference. The broker can’t bind coverage and will fight for their client to keep rates accurate if a rate has changed.

What’s a representative through a direct writing system?

Representatives through companies with direct writing systems work for the insurer and write insurance for the company directly. These companies don’t have agents, but they hire salespeople to promote, quote, and bind coverage. Many companies that try this strategy will have more than one channel for sales.

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Do agents earn a salary?

There are a variety of different ways that insurance professionals can make a living. How professionals are paid depends on their actual title. Some captive agents are salaried, but it’s more common for captive and independent agents to live off commissions. For salaried agents, the average salary paid by insurers is around $36,191 per year, according to PayScale.com.

How are representatives through direct writing systems paid?

All representatives who work for direct writer insurers earn a salary. When these professionals work in the sales department, their raises and bonuses are then dependent on how many policies they write in any given period. It’s common for the company to provide their salespeople with a goal and an incentive to exceed it. Some of the more reputable direct writers will offer a base salary plus commissions for their sales reps.

Do agents make commissions?

Suppose a company operates under a general agency system or an independent agency system. In that case, there’s a good chance that the agents will be compensated strictly with a commission. So if it seems as though your agent has a flexible schedule and can make decisions with confidence, chances are they’ve been in the game long enough to understand that their income depends on how well they do their job.

Commission-based agents earn a higher percentage of the premiums because they don’t have a salary to fall back on.

Typically, agents will earn between 2% and 15% of the premiums for the policy for the first term. They may also receive a percentage of the renewal if the client stays with the carrier. In addition, some companies will bump up renewal commissions to give agents an incentive to focus on retaining potential customers.

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Do independent agents earn more than exclusive agents?

Independent agents may be offered higher commissions through some carriers to push them to offer their products over the competitors. Whether an independent agent makes more depends on which carriers they represent and how much they sell per year. While the commission rates can be higher for independent agents, captive agents don’t have to run their commercials or design marketing materials. Independents also have to come up with start-up capital to build their business from the ground up. This all costs money out of the agent’s pocket.

How are brokers paid to sell an insurer’s products?

Brokers are paid on two ends of the spectrum in most cases. Out of all of the professionals who sell insurance, the broker is the only one who charges you a fee for their services. The broker sets the brokerage fee, and you must sign a fee disclosure when you buy your policy showing that you understand this is compensation that goes directly to the broker. Some fees are as low as $25, and others are as high as $250. You’ll need to consider how much you’re willing to pay for a broker to find you a policy.

Keep in mind that most brokers will also earn a commission from the carrier when an application is bound. However, this commission is lower than the commission for agents since the broker has no binding power.

It can be beneficial to know what you’re dealing with when buying a mandatory product like car insurance. If

you’re ready to go shopping for insurance, always think about how an agent’s commission structure can affect how they push products. You want to make sure that the person you’re trusting with your financial decisions has your best interest in mind and isn’t just worried about how they’re going to hit their monthly quota.

That may seem harsh, but when you’re looking into purchasing something as expensive as an auto policy, you need to have trust in the agent you’re working with. You can always look to see if they have favorable reviews, and even though it seems a little intrusive, you can discover what their payment structure looks like. Chances are, if you’re having trouble with an incredibly pushy agent, they may be working strictly on commission.

While dealing with a person can be nice, it’s convenient to generate quotes all at once on a quote comparison tool. First, go online and enter your information in the tool. After that, you can see for yourself how much you’ll pay for coverage through all of the best companies. Compare car insurance rates now by using our FREE tool below!