Financial Standard Comments - FSC insurance churn action divides planners

Comment by Not far enough ()

Not far enough () — Fri, 05 Aug 2011 14:29:35 +1000

Commissions should be 10% pa, like general insurance. That will stop the rorts and lower the premiums.

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Comment by Concerned ()

Concerned () — Fri, 05 Aug 2011 15:03:21 +1000

General insurances comms are mostly around 20%, not 10%. Lower comm will not stop rorts, but removing upfront comms has a better chance of doing so. You can dial down the comm amount in most polices if you feel it's appropriate.

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Comment by BillB ()

BillB () — Fri, 05 Aug 2011 15:26:44 +1000

What happens in GI is that the rep gets to a certain level of premium which provides the level of income to him he wants and he's happy. Its called reaching a plateau. BTW, most business insurance products pay the industry average 20% on a level commission basis, not 10%. BUT churning is alive & well when individual GI insurers react to " disaster " claims escalation
BUT the the comparison is chalk & cheese. The Statutory No1 funds of the life offices need new fresh healthly UNDERWRITTEN lives all day every day to subsidize the claims costs of the older risks already on the books. As the base of clients in the No 1 fund got older the premiums would escalate , without fresh new underwritten lives, NOT DECREASE
Age of client is not an issue in predicting GI claims.
But life insurers constantly need new blood, and that will only come from properly remunerated life advisers
If level commission was mandated, most life risk advisers would love a situation where they could predict their income each year and only have to work to keep the existing clients happy. We would pick the clients we know like "high touch " service and do lots of client lunches & golf games. Be seen around the traps. And if a policy fell off, we might need to find a new client. Easy peasy !
As to takeover terms, the real villians here are the re-insurers, because it is they who pay COMMISSION to the life offices every churn when the sum insured is over treaty. Yet re-insurers dont whinge and apparently gladly pay the commission to the life office, year after year, often without the opportunity to assess the risk. Why haven't they complained?
I would ban take-over terms.
But a claw back of 100% for a lapse in the first year would be, as it did in the old "tied " days, unfair on the adviser when for genuine reasons a client can't continue in the second year

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Comment by Riggles ()

Riggles () — Fri, 05 Aug 2011 15:39:32 +1000

The FSC represents Insurers and fund managers, so he is effectively biting the hand that feeds him. Like the threat of removing commission from insurance within super, stupid and ill conceived ideas about the legitimater replacement of business agin couldforce clients to act against their own best interests, and hang on to old outdated policies of insurance and not be "churned"
Commisions are know generally known as "conflicted remuneration" and an Adviser trying to look after his clients will now be officially known as a "churner"
And all of this war of attrition is being waged by individuals who have never sold a thing in their life!!!!!!!!!!!!!!!!!!!!!!!!!

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