How Much Money Do Insurance Agents in Singapore Make From Your Policies?

Insurance agent.

What was your immediate reaction to that term? Probably not the most positive. Many of us have experienced an old friend inviting us for coffee, only to have your chill catch-up sesh become a sales pitch.

The stigma around “insurance agents” has led them to rebrand as financial advisors, wealth consultants, or life planners. But in all seriousness, these insurance agents have every right to call themselves advisors, consultants, or planners for your wealth and life. These agents play a crucial role in helping you secure financial protection. Insurance matters—especially when it comes to safeguarding your loved ones from unexpected financial burdens due to illness or accidents.

The tricky part? Agents earn commissions on the policies they sell, making us skeptical about their advice. While it’s natural for them to want to make money, a good agent prioritises your needs—helping you choose a policy that fits your budget while offering solid coverage, rather than pushing high-commission products.

To help you better understand their earnings, we’ve put together a guide breaking down how much of your premiums go into an agent’s pocket for different plans, from whole life to retirement policies. Plus, we’ll share tips on what to do with this knowledge before committing to a policy.

 

Wait, wait, wait… you’re going to reveal the insurance agent commission rates? Isn’t that supposed to be a secret?

Firstly, we’re not going to reveal exactly how much each insurance company is paying their agents. That is not public knowledge for a reason, and anyway, they get updated relatively often each year.

However, what we will reveal is the general market range for commissions. Secondly, the fact that there are so many insurance agents (and former insurance agents!) in Singapore means that this is probably one of the worst-kept secrets.

Commissions to agents are usually paid over a 5- or 6-year period, with the first year being the biggest payout and the percentage decreasing thereafter till the 5th or 6th year. By the 7th year, agents usually do not earn anything from the policy anymore.

An exception is Integrated Shield Plans (IPs). For you, IPs offer additional health coverage that supplements your MediShield Life. For an insurance agent, IPs mean lower commission rates from the onset, but will continue to earn agents (relatively low) commission for as long as you keep paying premiums for them. 

Here’s a rough idea of the percentage of your policy premium that goes to insurance agents as commission.

	Agent commission (% of premium you pay)
	Year 1	Year 2	Year 3	Year 4	Year 5
Whole life plans (20 years)	70 – 75%	40%	10%	5%	2 – 3%
Savings plans (20 years)	65 – 70%	35 – 40%	5 – 10%	4 – 5%	2 – 3%
Retirement plans (20 years)	65 – 70%	35 – 40%	5 – 10%	4 – 5%	2 – 3%
CareShield (term plan, 20 years)	70 – 80%	40%	10%	5%	2 – 3%
Integrated Shield Plan	40%	10%	10%	10%	10%

When you look at these numbers, you can appreciate why some of your old friends decided to become insurance agents and are inviting you out for coffee. Say you’re an insurance agent and sell a product with premiums that cost $2,000 per year. At 50% commissions, in your first year, that’s $1,000 per product sold. If you sell 100 of these products to your friends over the course of a year, you’d earn you a cool $100,000 in commissions.

 

Which types of policies have higher commission rates?

Generally speaking, participating policies (“par” policies) earn agents higher commission rates than non-participating policies (“non-par” policies).

	Cash value	Premiums you pay	Commission agent earns	Examples
Participating policies	Yes, you can receive dividends and payouts	Higher	Higher	Whole life, retirement, and savings plans
Non-participating policies	No, protection only	Lower	Lower	Term insurance, Integrated Shield Plans

Par policies (e.g., whole life insurance, endowment plans) generally offer higher commission rates because they have higher premiums and a savings/investment component. In other words, the policy has cash value, and the policy owner can withdraw If a policy has cash value, the policy owner can at some point withdraw or surrender the policy for a payout, depending on the terms and conditions.

In contrast, non-par policies (e.g. term insurance) have no cash value and just focus on protection. Thus, they’re also more affordable than par policies, and agents earn less commission from them. Think of non-par policies a bit like a prepaid or pay-per-use card—you pay per year for just the coverage you need, with no bonuses thrown in.

 

So what should you do now that you’re aware of the commissions that insurance agents make?

Here are 3 things that will help you make a better decision when buying insurance from your financial advisor:

1. Understand why some insurance agents are more likely to sell you a product

Just because you now know that insurance agents pocket a larger commission from par policies doesn’t mean you should boycott all par policies. The commission rates we shared earlier are just for you to appreciate and have a better idea of how much agents can earn.

Instead of biasing insurance policies based on their commission rates, you should take time to understand policies and how useful they are in meeting your needs and objectives.

• Needs: Consider how much you earn, what your expenses are based on your current lifestyle, how much debt you’re servicing, and goals you want to achieve in the next 5 or 10 years (have a baby or buy a new house,  perhaps?). This will help to inform how much coverage you need in case something happens and you are no longer able to work. Remember, your biggest asset is you—you have the ability to earn an income for yourself and bring your life goals to fruition. 
• Objectives: Ask yourself who your dependents are and what liabilities you have. For example, if you have a child or aged parents, you’d need to provide for these dependents in the event of medical emergencies. If you have a mortgage to pay or business loans to manage, these are liabilities and risks exposures that you should manage. 

Once you understand your own needs and objectives, speak to your insurance agent to understand how the insurance policy works. You can then decide for yourself how well the policy meets your needs and objectives instead of just taking the agent’s word for it that this policy is “good for you”.

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ALSO READ: The Sandwich Generation in Singapore—Finances of Caring for Aged Parents and Children

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2. Understand that you shouldn’t be buying an insurance policy just to “help” the agent

Figuring out how policies work and mapping out your needs and objectives is hard enough. But buying an insurance policy from an insurance agent has another level of complexity: sometimes, we feel for the agent. They’re human beings after all, and they’re just trying to do their job and earn a living. Couple that with the fact that many of us might have relatives or old friends as our insurance agents, and sometimes we might—consciously or subconsciously—want to “help”the agent.

Here’s where understanding how the agent commissions work can be helpful. Except for integrated shield plans, which earn commissions for as long as you pay the premium, most policies earn significantly less after the first year and don’t earn anything at all for your financial advisor after the fifth or sixth year.

That means that the exorbitant premium you’re still paying on an annual basis? None of it is going to your financial advisor. Technically speaking, the agent no longer has any incentive to look at your policies from the seventh year onwards. So if you want to help your friend or relative out, don’t do it by buying a policy—do it because it is beneficial to both of you. It may mean $1,000 in commissions for them in the first year, but it’s going to cost you much, much more in the long run.

 

3. Remember that insurance is still important to ensure that you and your loved ones are protected

Once again, we’re not saying that insurance is bad. Everyone should be covered by insurance that they can afford and can cover them to the best of their ability. A true financial advisor will have your welfare in mind, and the monetary benefit to them will come from the good advice and planning they give you.

Make sure that your advisor runs through every policy that you’re interested in, and doesn’t try to push another product as “better” but ends up costing more. Ultimately, if you’re uncomfortable with working with your financial advisor, don’t feel obliged to stick with them. There are, after all, plenty of agents to choose from. When you find the right one, both of you will enjoy a mutually beneficial relationship.

 

Need help unpacking your insurance needs? Learn more about life insurance in our essential guide.