How much commission do insurance agents actually make?
In Malaysia, insurance commissions are usually spread out over the first six years of your policy. For most life insurance and Investment-Linked Policies (ILPs), the commission can be as high as 35% to 40% of your annual premium in the first year alone.
By the time you hit year six, your agent might have collected a total commission equivalent to 110% to 150% of a single year's premium. This is why agents are so motivated to keep you paying for at least the first few years.
| Year | Commission Rate (% of Annual Premium) |
|---|---|
| Year 1 | 35% - 40% |
| Year 2 | 20% - 25% |
| Year 3 | 10% - 15% |
| Year 4 | 10% - 15% |
| Year 5 | 5% |
| Year 6 | 5% |
(Please verify the latest commission disclosure documents with your specific insurer as rates vary by product.)
Why do agents prefer selling ILPs over Term Life?
If you ask for a simple life insurance policy, an agent might steer you toward an Investment-Linked Policy (ILP) instead. Why? Because ILPs have much higher premiums.
A 40% commission on a RM3,600 annual ILP premium (RM1,440) is much more "berbaloi" for an agent than a 25% commission on a RM600 Term Life policy (RM150).
Furthermore, agents often get extra "overriding" commissions if they hit specific targets or recruit new downlines. These incentives—along with fully-paid company trips and "Million Dollar Round Table" (MDRT) recognition—are all baked into the price you pay for your policy.
Can I buy insurance without paying an agent's commission?
Yes, you absolutely can. Since the introduction of Bank Negara Malaysia’s (BNM) LIFE Framework, insurers are required to offer "Direct Distribution Channels" (DDC).
This means you can walk into a physical branch or use an online portal to buy a basic life, medical, or critical illness policy without an intermediary. By buying "Direct," you skip the commission cost, which often results in lower premiums or higher cash value for your investment.
The Rise of Digital Insurers and EPF i-Lindung
In 2025, the game has changed. You no longer need to sit through a two-hour sales pitch to get covered. Platforms like Fi Life and even your EPF account now allow you to get covered instantly.
If you have an EPF account, check out i-Lindung. It allows you to use your Account 2 (Akaun Sejahtera) savings to buy life and critical illness insurance at extremely competitive, commission-free rates. It’s one of the best "lobangs" for affordable protection right now.
Is it better to go agent-free?
It depends on your personal "level" of financial knowledge. If you are tech-savvy and know how to read a Product Disclosure Sheet (PDS), buying direct is a great way to save money.
However, a good agent provides value during the claims process. If you’re hospitalised at 2 AM, an agent can help handle the paperwork while you focus on recovery. If you buy direct, you (or your family) are the "agent" and must deal with the insurer yourself.
FAQ: What Malaysians often ask
Q: Does my agent get a commission every time I renew my medical card?
A: Yes, agents usually receive a renewal commission (often 5-10%) as long as the policy is active, typically up to the 6th year, though some products offer "service fees" beyond that.
Q: Is "Direct" insurance cheaper than buying through an agent?
A: Generally, yes. Direct products (like those found on insurer websites or EPF i-Lindung) are designed to be simpler and cheaper because they don't involve a middleman fee.
Q: If I cancel my policy, does my agent lose money?
A: If you cancel within the first two years (the "clawback" period), the agent may have to return a portion of their commission to the insurance company. This is why they might be extra "persuasive" to keep you from surrendering a new policy.
Q: Can I change my agent if they are not helpful?
A: Yes, you can request a "Change of Agency" from the insurer, but many companies make this process tedious. Alternatively, you can deal directly with the insurer’s customer service.
Conclusion
Understanding insurance commissions isn't about being "kedekut"—it’s about being a smart consumer. Agents deserve to be paid for their service, but you shouldn't be pushed into an expensive plan just to fill a sales quota.
In 2026, you have the power to choose. Whether you want the personal touch of an agent or the cost-savings of a direct digital plan, always read the fine print.
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