The majority of advisers want to retain the choice of commission options for replacement insurance business and want the life companies to do more to discourage ‘churning’.
These are the key outcomes after advisers have had their say in response to our latest poll question:
Should adviser remuneration on replacement life insurance business be restricted to level commission only?
At time of publishing, a healthy 70% of poll respondents said they are against the proposition of restricting replacement business to level commission only.
A very common argument expressed by poll respondents was, why should the majority of advisers who effect replacement insurance business for all the right reasons be penalised because of the actions of the few who ’churn’ business?
This argument then lead to the call from many advisers for the life companies to do more to stop churning. Typical comments:
“Why penalise Advisers who do the right thing by their clients, due to the actions of a few?”
”If the companies have a problem with churners they should deal with them directly (they know who they are) ~ but don’t penalise the innocent.”
Another argument expressed by a number of advisers relates to the time and effort involved in facilitating replacement business:
“…the work required to replace a policy is just the same as if writing a new client and the level of commission does not cover our upfront costs in the first year.”
A further solution suggested by a few advisers was to increase the responsibility periods for new business written on an upfront or hybrid commission basis.
However, 28% of poll respondents favour a restriction to level commission only. And while the ‘innocent’ may well be disadvantaged, some key life industry identities maintain that restricting replacement business to level commission is the best way to significantly reduce the industry ‘churn’ rate.
This issue is positioned within the broader ongoing debate about the nature of adviser remuneration. So, could we equally ask whether adviser remuneration on replacement insurance business should be restricted only to fee for service?
Perhaps the growing number of dealer groups who advocate adviser remuneration by fee for service may consider this option in future?
Hundreds of advisers have taken the time to vote and/or comment on this issue, and we are leaving our poll open for another week for those who have yet to make their voice heard. To have your say…
Add your comment now
One Comment
What about the adviser who replaces business written by our office just 4 months after it is implemented? Just what did he tell the client? A few years ago such a churn would mean I could claim back the new business commssion on his sale! I would like to see his SOA and meet him one dark night!