tmmonline.nz  |   landlords.co.nz        About Good Returns  |  Advertise  |  Contact Us  |  Terms & Conditions  |  RSS Feeds

NZ's Financial Adviser News Centre

GR Logo
Last Article Uploaded: Sunday, April 14th, 8:46PM

Blogs

rss
Latest Headlines

Product commission – Is it justified?

Should you be concerned about commission when arranging your insurance? With recent media commentary following the Reserve Bank and Financial Markets Authority paper, the way in which insurers remunerate or incentivise their staff and advisers has been raised around industry’s culture and conduct.

Friday, February 22nd 2019, 10:11AM 1 Comment

by Brian Klee

Brian Klee

Massey University’s research revealed New Zealander’s are hugely underinsured compared to the rest of the developed world. Without a robust insurance market here, it would severely impact on our social welfare resources. Every day, $3.3-million are (is) paid out on claims, i.e. $1.2-billion a year. Premiums charged by insurance companies are directly impacted by the amount of claims paid.

Insurance is an intangible product which is seldom actively sought by consumers. The need for insurance and the protection it provides is usually identified and articulated by an adviser, or by an insurer selling its own insurance products. Unless someone loses someone, or something, the realisation of the need for insurance is rarely recognised.

Those who persuade others to get insurance should be rewarded and incentivised. It’s challenging work and usually involves considerable time and complex effort before, during, and after insurance is arranged. Commission paid by product providers to advisers has proven to be the most cost-effective approach, as research shows that few New Zealanders are willing to pay fees for advice on personal life insurance. Only businesses are prepared to pay a fee for such advice.

Criticism has been levelled at (what appears to be) high levels of commission paid to NZ advisers. But just like other businesses, advisers incur significant overheads running their businesses, e.g. office rent, staff, equipment, professional fees, etc. It would be rare for an insurance adviser to personally receive more than 45% of the commission paid.

Commission only rarely affects advice as explained in this article.

Besides the documented recommendations, what is important to you is professional disclosure. This is an issue that the FMA and MBIE will soon set legally-defined appropriate standards. This is especially relevant if you are advised to switch to different policies by either an adviser receiving commission, or an incentivised salaried person. Greater industry transparency and ethical standards must be improved.

There is a cost attached to providing suitably qualified, competent, and much-needed financial advice, and cost is only an issue when value cannot be identified.

“Insurance is best sold with a sound degree of ethical advice.” Especially to those who most need it.

This article first appeared on life-info.org.nz

Tags: Commission

« [The Wrap] [The Wrap] Promoting the value of advice »

Special Offers

Comments from our readers

On 22 February 2019 at 5:57 pm S Deeble said:
Good Article. You demonstrate understanding of reality in the field e.g. your reference to opex and what Advisers actually earn after expenses. Appearance vs Reality.

Sign In to add your comment

 

print

Printable version  

print

Email to a friend
News Bites
Latest Comments
Subscribe Now

Mortgage Rates Newsletter

Daily Weekly

Previous News
Most Commented On
Mortgage Rates Table

Full Rates Table | Compare Rates

Lender Flt 1yr 2yr 3yr
AIA - Back My Build 6.19 - - -
AIA - Go Home Loans 8.74 7.24 ▼6.75 6.65
ANZ 8.64 7.84 7.39 7.25
ANZ Blueprint to Build 7.39 - - -
ANZ Good Energy - - - 1.00
ANZ Special - 7.24 6.79 6.65
ASB Bank 8.64 7.24 ▼6.75 6.65
ASB Better Homes Top Up - - - 1.00
Avanti Finance 9.15 - - -
Basecorp Finance 9.60 - - -
Bluestone 9.24 - - -
Lender Flt 1yr 2yr 3yr
BNZ - Classic - 7.24 6.79 6.65
BNZ - Green Home Loan top-ups - - - 1.00
BNZ - Mortgage One 8.69 - - -
BNZ - Rapid Repay 8.69 - - -
BNZ - Std, FlyBuys 8.69 7.84 7.39 7.25
BNZ - TotalMoney 8.69 - - -
CFML Loans 9.45 - - -
China Construction Bank - 7.09 6.75 6.49
China Construction Bank Special - - - -
Co-operative Bank - First Home Special - 7.04 - -
Co-operative Bank - Owner Occ 8.40 7.24 6.79 6.65
Lender Flt 1yr 2yr 3yr
Co-operative Bank - Standard 8.40 7.74 7.29 7.15
Credit Union Auckland 7.70 - - -
First Credit Union Special - 7.45 7.35 -
First Credit Union Standard 8.50 7.99 7.85 -
Heartland Bank - Online 7.99 6.69 6.45 6.19
Heartland Bank - Reverse Mortgage - - - -
Heretaunga Building Society 8.90 7.60 7.40 -
HSBC Premier 8.59 - - -
HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
ICBC 7.85 7.05 6.75 6.59
Lender Flt 1yr 2yr 3yr
Kainga Ora 8.64 7.79 7.39 7.25
Kainga Ora - First Home Buyer Special - - - -
Kiwibank 8.50 8.25 7.79 7.55
Kiwibank - Offset 8.50 - - -
Kiwibank Special - 7.25 6.79 6.65
Liberty 8.59 8.69 8.79 8.94
Nelson Building Society 9.00 7.75 7.35 -
Pepper Money Advantage 10.49 - - -
Pepper Money Easy 8.69 - - -
Pepper Money Essential 8.29 - - -
Resimac - LVR < 80% 8.84 8.09 7.59 7.29
Lender Flt 1yr 2yr 3yr
Resimac - LVR < 90% 9.84 9.09 8.59 8.29
Resimac - Specialist Clear (Alt Doc) - - 8.99 -
Resimac - Specialist Clear (Full Doc) - - 9.49 -
SBS Bank 8.74 7.84 7.45 7.25
SBS Bank Special - 7.24 6.85 6.65
SBS Construction lending for FHB - - - -
SBS FirstHome Combo 6.19 6.74 - -
SBS FirstHome Combo - - - -
SBS Unwind reverse equity 9.95 - - -
Select Home Loans 9.24 - - -
TSB Bank 9.44 8.04 7.55 7.45
Lender Flt 1yr 2yr 3yr
TSB Special 8.64 7.24 6.75 6.65
Unity 8.64 6.99 6.79 -
Unity First Home Buyer special - - 6.45 -
Wairarapa Building Society 8.60 6.95 6.85 -
Westpac 8.64 7.89 7.35 7.25
Westpac Choices Everyday 8.74 - - -
Westpac Offset 8.64 - - -
Westpac Special - 7.29 6.75 6.65
Median 8.64 7.29 7.32 6.65

Last updated: 8 April 2024 9:21am

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