About Good Returns  |  Advertise  |  Contact Us  |  Terms & Conditions  |  RSS Feeds Other Sites:   tmmonline.nz  |   landlords.co.nz
Last Article Uploaded: Sunday, March 24th, 5:30PM
rss
Latest Headlines

Servicing adviser should get trail

Forget about upfront commissions, one adviser says churn should be tackled by allowing trail commissions to be paid to the servicing adviser – not simply the person who sold the product in the first place.

Thursday, February 21st 2019, 6:00AM 2 Comments

The Government has revealed its plans to crackdown on incentives that create poor customer outcomes in financial services, including high upfront commissions and overseas trips for insurance advisers.

It follows a critical report into the sector by the Financial Markets Authority and Reserve Bank.

But adviser Colin Just said while advisers were being encouraged to churn clients, it was not simply because they were paid a big commission for issuing new policies.

He advisers were incentivised to move any new client who came to them already holding an insurance policy.

If an insurance adviser wants to take over a client who has been provided with a policy provided by another adviser, they can do so – but they will not be paid for it. The adviser who initially placed the client in the product continues to receive the trail commission so long as the client holds the policy.

Just said, on the half-a-dozen times he had approached a client’s existing adviser to discuss buying that person’s business, he had been denied.

“They get paid, I do the work.”

He said he would usually do it anyway because often clients had come to him for a mortgage and wanted him to handle everything, but the client felt it was unfair, too.

“The only way I get paid is if I take them to a new insurance company. The companies create their own churn.”

Shifting clients created the potential for people to be caught by standdown periods or pre-existing conditions.

Just said it would be better to have a model such as with mortgage broking, where if he did not conduct the client’s review with Westpac when their fixed term finished, the bank would take it over and trail would stop.

“if you’re doing the work you should get paid. If you don’t, you shouldn’t.”

In the recent FMA/Reserve Bank report on life insurers, the regulators said advisers should be incentivised to give ongoing service and advice to customers.

FMA spokesman Andrew Park said: "Our primary concern raised in the recent insurance report is around commission structures and incentives that are not aligned with good customer outcomes, those incentives that prioritise sales volumes rather than the customer’s interests. We have included the reference to those points below at the bottom. MBIE are probably best placed to respond to questions about regulating and policy for commissions."

He said it was one area that insurers would have to consider when they respond to regulatory feedback and the tasks they were required carry out by the end of June.

Tags: Churn Life insurance

« Claims hit nib's bottom lineAussie new insurance business falls after commission capped »

Special Offers

Comments from our readers

On 22 February 2019 at 12:50 pm Phoenix said:
So how about any replacement policies have their commission set on a spread basis? Any new cover can still proceed on an upfront basis.
On 22 February 2019 at 2:48 pm Interested AFA said:
Phoenix, that would never work - looks like too much common sense to me, and there does not seem to be much of that floating around the 'authorities' and regulators.
Another move could be that if a client signs a 'change of adviser' form then this automatically requires a sale of that client to the new adviser at, say, 3X renewal. Automatic, no if and buts.
If the policy is then re-written it is a financial loss to the new adviser, not the old adviser - offset of course by any new initial commission on the new contract.
Might make some think twice before cancelling a perfectly good contract, especially if the new contract can only be written on spread commission terms.

Sign In to add your comment

 

print

Printable version  

print

Email to a friend
Insurance Briefs

AMP leadership skips bonuses
AMP's group leadership team will receive no-short term cash incentives for this financial year, a move that will cost them hundreds of thousands of dollars each.

Newpark signs deal to connect with migrants
Newpark has agreed to a “strategic partnership” with immigration consultants Ezymigrate.

AIA Group reports double-digit growth

Accuro boasts growth
Accuro has added another 5000 clients to its books in the past year.

News Bites
Latest Comments
  • [The Wrap] Soothing words from the minister
    “Apposite commentary from commentary in ifa Bulletin Risk by Adrian Flores - March 22, 2019 Life commissions ‘good...”
    3 days ago by Murray Weatherston
  • Partners pulls ads after mosque tragedy
    “Brilliant adds hopefully they return very soon.To be fair there wouldnt be an add shown that someone couldnt take offence...”
    3 days ago by Brian W Brown
  • Mint axes performance fees
    “Have to laugh and wonder why this wasn't an issue during 5 years as a FMA Board member. Mint appear to have had a reasonable...”
    3 days ago by MPT Heretic
  • Mint axes performance fees
    “Congratulations, Rebecca Thomas and Mint: on the face of it a positive move. Time for FMA to come to the party; and for...”
    3 days ago by Simon H
  • [The Wrap] Soothing words from the minister
    “Completely agree Murray. The insurers have taken the opportunity to kill off the trips, they're costly and a hassle to plan,...”
    3 days ago by JPHale
Subscribe Now

Cover Notes - Specific news aimed at risk advisers

Previous News

MORE NEWS»

Most Commented On
About Us  |  Advertise  |  Contact Us  |  Terms & Conditions  |  Privacy Policy  |  RSS Feeds  |  Letters  |  Archive  |  Toolbox
 
Site by Web Developer and eyelovedesign.com