Do car insurance agents get paid?

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Here's what you need to know...

  • 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 2 and 15 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 services 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 they can sell insurance, their mission to match a prospective client to a product that they sell is definitely driven by the fact that their sales have a direct effect on their income. As agents, they are salespeople whose performance is measured and who’s income is dependent on their performance.

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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. Considering the fact that an agent’s compensation can affect how much you’ll pay out-of-pocket, it’s important that you 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. One of the most popular types that you’ll come across when you’re contacting a company directly is an exclusive agent. 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.

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 actually employed by these companies. Because of this, they produce their own marketing materials and manage their own business operations. Consumers who do business with independent agents can compare the rates with multiple carriers but it’s possible that the professional could push products from carriers that offer them higher commission rates.

What’s an insurance broker?

An insurance broker is very similar to an independent agent but the broker isn’t appointed by an insurance company. 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 consumers 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 direct. These companies don’t have agents but they do hire salespeople to promote, quote and bind coverage. Many companies that try this strategy will have more than one channel for sales.

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 of 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 of time. It’s common for the company to give their salespeople a goal and an incentive to exceed the goal. Some of the more reputable direct writers will offer a base salary plus commissions for their sales reps.

Do agents make commissions?

If a company operates under a general agency system or an independent agency system, there’s a good chance that the agents will be compensated with strictly commission.

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. Some companies will bump up renewal commissions to give agents an incentive to focus on retention.

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 own commercials or design their own 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 brokerage fee is set by the broker 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. This commission is lower than the commission for agents since the broker has no binding power.

It can be very helpful to know what you’re dealing with when you’re 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. While dealing with a person can be nice, it’s definitely convenient to generate quotes all at once on a quote comparison tool. 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!

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