For insurance agents considering a career with Farmers Insurance, one of the most important factors is understanding how you will be compensated. Farmers relies on a network of over 20,000 exclusive, captive agents to sell their products. These agents represent Farmers as their only insurer partner.
As a Farmers agent, your income will come from commissions earned on new policies sold and policies you continue to service and retain. However, Farmers commission structure and pay scales are not always straightforward. Here is an in-depth look at how Farmers insurance agents are paid.
Farmers agents earn commissions as a percentage of the premiums paid on insurance policies they sell. However, Farmers does not publish a standard commission schedule. Rather, they determine each agent’s commissions individually based on:
Generally, commissions will range from 8% to 20% of new premiums written. Higher commission rates are offered to agents who sell more or have better retention. Renewal commissions on policies you continue to service may be 3% to 10% of premiums.
Bonuses and profit sharing can add 1-3% more to your compensation. And your commission rate increases incrementally as you hit certain production goals.
While every agent’s commissions are proprietary, these factors have the biggest influence on your rate as a Farmers agent:
While individual commission rates aren’t published, we can look at the typical ranges by product:
Add-on products and coverage amounts impact commissions positively. Your overall “book of business” mix across lines also factors in.
Farmers utilizes two main structures for agent commission compensation:
This is for new agents getting started. Farmers pays you a salary $30,000 to $40,000 for your first 1 to 2 years as you build your book. You keep a smaller share of commissions, likely 25% to 50% of the totals above.
The salary provides stability as you learn and ramp up. And Farmers recoups their investment through the remaining commissions.
Once established, you transition to 100% commission-based pay. This offers unlimited earning potential tied directly to your production, retention, and total book profitability.
However, the first few years can be unpredictable. Drawing on your savings to cover gaps is key. And you fund all your own overhead expenses.
Farmers agents receive commissions monthly based on policies sold and renewed the prior month. Payments are made electronically on the 15th of each month.
Bonuses are paid at year end based on annual goals met. Profit sharing earnings from participation in Farmers’ retirement plan are also paid annually.
To receive commissions, you must remain a licensed, active Farmers captive agent. If you retire or leave the company, Farmers will terminate your agent contracts. This means you no longer receive ongoing commissions on your book – so staying with Farmers long term is incentivized.
Given the variables involved, projecting your potential income as a Farmers agent requires looking at realistic production scenarios.
For example, let’s say in your first year you sell:
That’s $100,000 in new premiums written across a mix of products in your first 12 months. Apply commission rates:
That’s $21,850 in first year commissions. Factor in 20% for renewals on the prior book before yours, and you could earn around $45,000 your first year.
Ramping up to 500 policies by year three could put you over $200,000. High performers can potentially earn $500,000+ after 5-7 years.
Farmers’ commission-focused agent pay model has advantages and disadvantages:
Pros
Cons
Overall, if you excel at sales, marketing and customer service, Farmers presents a compelling income opportunity. Just know it may take time to ramp up, and requires ability to sell across product lines.
Farmers can be rewarding for the entrepreneurially-minded agent motivated by commissions. But there are a few key factors to weigh:
Asking yourself these questions will help determine if Farmers, with its captive agent model and commission-driven pay, is the right place to grow and thrive in your insurance sales career.
Which insurance company pays highest commissions to agents?