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Understanding Agent and Broker Commissions on Insurance Sales

October 21, 2021   |   by Alex Strautman
health insurance agent commission

As an insurance agent or broker, you earn a commission on each product you sell – whether your focus is on Individual & Family Plan (IFP) sales, Small Group Medical or Ancillary sales, Large Group Medical and Ancillary sales, or other products such as Property & Casualty Insurance (including auto, homeowners, and related coverage) or Life Insurance.

How Much Do Health Insurance Agents Make?

Commissions vary by product, carrier, and market niche, although most Major Medical insurers offer comparable commissions on similar products. In addition to commissions, agents and brokers may also be eligible to earn bonuses or awards based on cumulative sales, added compensation for products sold during a specific sales contest period, travel rewards, or other incentives.

Those who sell Major Medical and Life Insurance coverage sometimes earn a higher first-year commission and lower commissions in renewal years, especially for IFP coverage. Life Insurance will sometimes only pay a commission in the first year. That’s because a Life policy will generally stay in force for as long as the premiums are paid, and there’s no significant servicing required except at the time of death or when the policy term nears its end (like for a 10-, 15-, or 20-year Term Life policy).

Group or employer-sponsored Major Medical agents and brokers often earn the same compensation in the first and subsequent years. That’s because those sales require some ongoing account management and renewal activities, including managing each group’s annual open enrollment.

Health Insurance Agent Commission

According to the Kaiser Family Foundation (KFF), a non-profit organization not affiliated with Kaiser Permanente health plan, the national compensation for Health Insurance brokers in 2020 was $15.58 per member per month (pmpm) for all sales, including IFP, Small Group, and Large Group. For Small Group only brokers, the average comp in 2020 was $22.54 pmpm; for Large Group sales, the national average comp in 2020 was $9.97 pmpm. (Of course, the difference in comp is offset by your potential to earn more because of higher case enrollments.) In California, Large Groups are those with 101 or more employees; in Nevada, Large Groups are those with 50 or more employees.

As noted, the amount earned on the sale of Major Medical coverage in the group marketplace varies by product and carrier. For example, you might earn from five to seven percent depending on the group size or annualized premium. You could earn a given percent up to a specified premium and a lower commission above that amount. You could also earn a higher amount during the first year, a slightly lower amount in year two, and a declining percent in subsequent years. You may also earn the same commission percentage year after year. It depends on your contract and the insurer.

As a health insurance sales professional, your compensation could be affected by whether you are licensed as an “agent,” working on behalf of a single company, or as a “broker,” who represents multiple carriers and administrators. A State Farm or Allstate representative is licensed and appointed to sell insurance only on behalf of those companies, and his or her commission comes almost exclusively from there. An independent broker may sell products from multiple companies; for example, a broker selling Major Medical may represent a “Blues” carrier, Kaiser Permanente, and Cigna + Oscar, or a regional carrier or administrator like Prominence Health Plan, Sharp Health Plan, Sutter Health Plus, or Western Health Advantage.

A broker may also be appointed to sell multiple plans through a multi-carrier exchange like the CaliforniaChoice private exchange, which offers coverage from eight health plans (in 2022) through a single program.

Ancillary products like Dental, Vision, Life, and Disability (STD, LTD) typically pay a level commission for all years. You could earn 10% on Dental and Vision and, perhaps, 15% for Life Accidental Death & Dismemberment (AD&D), and Disability. Some carriers offer a negotiable commission. As an example, in California, Cigna’s Dental products for groups with 26-200 employees offer a negotiable commission.

The amount you earn on Ancillary sales could also be affected by whether a product is co-brokered (offered in association with another broker). Commissions may be flat (the same in all years), or they may decline over time. Again, it varies by carrier and product.

Whether a product is offered as employer-sponsored (with the employer paying all or a majority of the premium) or voluntary (with the premium paid entirely by employees) could also affect commission.

Commissions paid on what are often referred to as “Supplemental Health” products can vary considerably. The products in this category include Accident, Hospital Indemnity or Hospital Confinement Indemnity, Critical Illness, Cancer, and similar coverage. Depending on the underwriting company, commissions for these products may be the same in all years or they may vary.

You may also be able to earn a bonus or added reward from an insurer or administrator based on your total, calendar-year sales, total enrollment (across all business), premium volume, the sale of a certain product during a specific period, or when bundling Major Medical with another product like Dental, Vision, Life, or something else.

What is important – for you and your customers – is that you have a broad product and service portfolio available to help you address the diverse needs of your clientele. Partnering with the right General Agency can help. Word & Brown works with dozens of carriers and administrators to give California and Nevada access to a broad range of Small Group and Large Group products – plus IFP.

When making product recommendations to prospects and customers, it’s especially important that your suggestions be based on what best serves your clients’ interests – not what offers you the greatest compensation or other rewards. It is part of your commitment to ethically fulfilling your role as a licensed insurance sales professional

The events of the past 18 months, and the global response to COVID-19, have prompted many employers and employees to reconsider what’s important when it comes to health, health care, and employee benefits. Some employees are now open to insurance products they have not considered – or may have declined – in the past. Many employers have expanded their voluntary benefits offerings. Others have moved to enhance their core employee benefits programs. Doors are opening, and that means increased sales and earning opportunities for you.

To learn more about the compensation you can earn when you partner with Word & Brown, contact your Word & Brown representative or any of our six regional offices in California and Nevada. To find out about current available 2021 bonuses, read A Guide to Broker Bonuses: How to Earn More in Q4.

 

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