ClearView has launched a new online payment facility that will allow financial advisers to charge and process flat fees for life insurance advice.
Advisers will be able to access the new Advice Implementation Fee (AIF) facility via the ClearView website and apply fees to life insurance advice or use a combination of fees and commissions through the facility.
CleaView stated the purpose of the AIF was to help advisers develop alternative remuneration structures under the Life Insurance Framework.
This included allowing advisers to supplement reduced commission payments in the first year of the LIF regime, exchanging renewal commissions and premium discounts for an upfront fee, and charging an advice fee that was not dependent on the client proceeding with a life insurance application.
ClearView General Manager of Distribution, Christopher Blaxland-Walker said the facility would allow advisers to take action to prevent a decline in cash-flow but would require them to move into charging fees for insurance advice.
“Advisers need to rethink their commission and fee structures, and start asking to be paid a reasonable fee for the vital work they do and the value they add. This is a new and uncomfortable concept for many but it has the potential to transform their business,” Blaxland-Walker said.
“The right model will vary from adviser to adviser depending on a multitude of factors including their overall business model, their client demographic and target market and the level of service they provide,” he added.
“Our AIF facility is intended to give advisers more choices and the opportunity to evolve their pricing and proposition at their own pace,” Blaxland-Walker said.
The launch of the payment facility follows other recent service enhancement from ClearView which recently upgraded its electronic quoting and application system and the implementation of tele-interviewing and tele-underwriting (see: ClearView Revamps Quote and Application Platform).
Dear Mr Blaxland-Walker,
Just so I understand your new AIF model correctly.
Almost all life companies allow an initial no commission premium discount of 30.0% to the client, if a fee for service is charged ?
How big is your discount ?
If it’s the same as everyone else’s, and I suspect that it is, then can you explain to me if you were my client how you would feel under the following scenario…..
If the premium was say $2000 and using this example by offering a nil commission discount, the consumer would be expected to pay $1400 initially.
Assuming from advice to submission and completion my fee for service was @$100 per hour, it would be unlikely that this would take less than 9 hours.
So my fee would be $900 on top of the $1400 Clearview wanted, meaning the client would be outlaying $2,300 for something that would have cost $2,000. That’s 15.0% more.
Do you know anyone including you who wants to pay 15.0% more than they might have otherwise? Obviously if my fee was $150 per hour or even $200 per hour all this has a snowballs chance in hell of getting off the ground.
Now using the current maximum 80.0% commission model I now have the potential to receive $1600 commission,
Under your fee for service /no commission model, I would have to find twice as many clients to earn the same amount and also convince a client to pay 15.0% or more than they would have otherwise.
Yes, I concede that my model runs the risk of me repaying 60.0% of commission received, even up to the 23rd month but, tell me how do I insulate myself from getting paid a fictitious fee for service if the client doesn’t proceed because your company has decided not to accept their application for whatever reason ?
Alleycat, you’ve highlighted a problem that everyone who pushes insurance fee for service seems to ignore – the premium reduces by only 30% where no commission is taken. In previous risk info editions, Chris Unwin has also stated a fee for service can work. When I asked him to explain even after including examples similar to what you have done, he never ever replied! I wonder if Chris Blaxland-Walker will reply to you?
Hi Allycat, I completely agree with you, but you are literally talking to deaf ears. The insurer CEO’s simply don’t get it. They don’t get the fact that the LIF makes it unprofitable to write new business. They just thought they would make more profit and advisers would suck it up and write more business.
They also don’t get the fact that customers don’t want to pay fees for risk insurance.
I’ve had BDM’s coming out with LIF calculating tools to “help” you understand how much more business you will need to write to earn the same money. Again they simply don’t get the fact that if we could have been writing more business we would have and they simply don’t get the fact that if a 60/20 with a 2 year clawback makes it unprofitable per case, so why would we write more unprofitable business.
FASEA don’t get the fact that most advisers in their 50’s (the average age) would be insane to take a new degree just for a few more years in an industry that is becoming harder and harder to make a living.
The FSC think that direct insurance will be better for them and more profitable but they don’t get the fact that they will ultimately lose more money in this space.
The insurers don’t get the fact that if they raise premiums on existing books and reduce premiums on new business they will have higher lapses.
THEY DON’T GET IT because they have no understanding of advisers.
And the CEO’s and BDM’S are already wondering why new business rates are dropping, like its a mystery!
Unfortunately it’s not just the insurance companies mis understanding of the fee for service process and it’s inability to function at a profitable level The clients have little or no understanding of underwriting its procedure and issues that may arise from answers given on the application They see these “sugar coated” Real insurance adds and think the process is just about signing up and away we go !until they have a claim !!!
Why would they think they need to pay for advice when the product is displayed so simplistically for free no fee ? ( no yearly follow up no initial look at their actual needs simply no care !! )
How do we go when a diabetic signs up for Income protection no bloods no Medical’s limited questions if any ?? And is accepted then in 5 years has a claim ? Do they pay ?? Maybe after a long drawn out court case! The Solicitors must be loving this ?
This whole online thing sounds so simple and easy to them why pay to get the advice and why pay so much ??
It really is a disaster looking for a time and place to happen
So sick of hearing how charging the client more is going to improve their consumer rights provide better advice and help the advisors business grow
There are way to many people living in a fantasy world both within the insurance companies and those in the community that think it’s easy to do this and provide the right advice
@ Warren B,
Mate, I’m not holding my breath.
Sooner or later when the premium outflows become a torrent compared to premium inflows because of increased premiums together with reduced benefits from inferior products and rejected claims via the Direct channel are realised, these people might figure out what they created, was self serving and no one came out of this a winner !
You would think that this kind of thing (fee for service) already tried and proven an abject failure in the UK would be a lesson learned by our industry and the government.
The fact that the UK reverted back to a sustainable commission model should have told even the most biased against commission based remuneration that this is the only way the consumer and advisers can co-exist.
Fee for service can work with high net wealth clients for risk when accompanied with Investment advice as it can be grouped into an annual fee (which will never EVER be below $2,000 pa and usually in excess of $5,000 pa). It cannot work for the people who actually need insurances (mum and dad clients) unless ASIC removes all the ridiculous red tape associated with advising clients on insurances and we start to recommend policies which underwrite at claim time.
In fact, fee for service for insurance would actually be breaking the Best Interest Duty in most cases. Take the example from Alleycat below where the client has a $2k premium. How can anyone say it is the client’s best interest to have them pay 15% more for the same insurance and advice?
Unfortunately clients will go direct and lawyers will be the main beneficiaries of most insurance policies.
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