Entrepreneurship and Employability Skills in Insurance: Commission, Persistency and POSP
Domain 8 treats the agency as a small business and the candidate as a hireable professional. The paper asks about income, persistency, digital tools and the conduct expected of an insurance entrepreneur.
The agency as a business
- It is a sole proprietorship with no capital requirement; the raw material is a documented customer base and the income is commission, not salary.
- First-year commission is earned once; renewal commission recurs and is the real asset. A book of 200 loyal policyholders pays every year.
- Persistency is the percentage of policies still in force at the 13th and 61st month; it decides renewal income, insurer support and eligibility for higher payouts.
- POSP (point of sale person) is the low-entry route: appointed and trained by an insurer and authorised to sell a defined set of products such as motor third-party, personal accident, travel, home and micro-insurance.
Employability skills the paper rewards
- Numeracy: premium, commission, break-even and claim arithmetic.
- Communication and documentation: a written needs analysis, a correctly filled proposal form, clear disclosure of exclusions.
- Digital and data: an e-insurance account, the insurer's app, Bima Sugam for servicing, and compliance with the DPDP Act, 2023 when storing customer data.
- Ethics and grievance handling: the job does not end at the sale; servicing produces referrals and renewals.
Worked example
Monthly expenses of ₹15,000 plus a target income of ₹25,000 give an earning need of ₹40,000. At ₹10,000 commission per policy (25% of a ₹40,000 premium), that is four policies a month. Alternatively, 300 policies with an average renewal premium of ₹15,000 at 5% renewal commission earns ₹2,25,000 a year - which is why persistency outweighs a one-time sale.
Traps
- Counting only first-year commission and ignoring renewals.
- Churning - replacing a customer's existing policy to earn fresh commission.
- Keeping customer KYC and health data on an unprotected personal phone.