- Yes (52%)
- No (29%)
- Not sure (19%)
Our latest poll asks whether financial advisers would consider the merits of linking life insurance commissions with the quality of the business they produce.
The current ‘sustainability’ debate is not going away until a more viable, long-term industry strategy has been established. The adviser message from our most recent poll (see: … Advisers Call on Insurers to Share the Pain) is that life companies need to come to the party by delivering better policy retention initiatives, banning serial churners, simplifying the policy upgrade process, etc. Meanwhile, the life companies, through the Financial Services Council, have identified the level of adviser remuneration as a key issue (but not the only issue) that needs to be addressed.
This poll seeks to gauge whether advisers would consider a different remuneration model for risk products where they could earn as much, and possibly more than they do at present, but have that remuneration aligned to quality factors.
Commission clawback rules can be considered an existing quality control measure, but suggestions have been made that additional criteria could be implemented, such as overall policy retention levels and client service feedback. The underlying argument for this model is that advisers should be remunerated on a scale that reflects the quality of the business they submit, rather than just the volume. Naturally, the higher the adviser’s quality score, the higher their level of remuneration.
Similar models as outlined above have already been implemented overseas, and we will be reporting on these initiatvies in more detail. In the meantime, however, we’d like to know your own thoughts, in principle, on what may be a very sensitive, but critical issue…
“This poll seeks to gauge whether advisers would consider a different remuneration model for risk products where they could earn as much, and possibly more than they do at present, but have that remuneration aligned to quality factors.”
The above is the key reason for this poll. Anyone would consider a remuneration model which allows them to earn as much as they do now. I don’t know about any such model and how it could be implemented, but if it addresses the current issue, well, I’m all for it.
No system is perfect. If a GP misdiagnoses a minor ailment his patients don’t get a refund, nor do they for a major ailment unless the patient sues or it becomes a class action. On that basis, why it is that we advisers are always the ‘fall guys’ when a policy falls over then? There are serial churners, but that’s just the tip of the iceberg of other industry shortcomings.
Not wanting to be a naysayer however the implication seems to be that we go back to the days of additional payments for better retention rates across an advisers book of business. This sounds like adviser level volume bonuses to me.
Aren’t these types of remuneration conflicted in the sense that the adviser is incentified to place “quality” business where they have the best retention rates and poorer quality business with companies where they a poor retention rate. Not a good outcome I would of thought.
Service fees for customer service with bonuses based on customer feedback is an area worth exploring. The issue here is Australians who are notorious of not giving feedback apart from voting with their feet.
Would someone please define ” quality ” business ?
It cant be healthy risks. Good underwriting prices policies appropriately
Does it mean low claims. Out of adviser control in reality. What about an adviser encouraging ( or even paying ) clients not to claim on IP until the end of the bonus calculation period – surely not, but it could be tempting. Tombstoning is , according to ASIC, alive and well, so nothings impossible.
I know – business stays on books! Even with outrageous premium increases and lousy claims actions?. Where is the clients best interest in that scenario.
As to customer surveys, most clients will be un-available for a call & always ignore letters.
What about an insurer offering take-over-terms to a favoured adviser. Will they ever learn!.
Sadly, insurers will only respect you in the morning if you produce, Lots. Very big lots
And I want the same commission deal as anyone else, not like some companies where no 2 advisers were on the same deal. That encourages churning
The devil would be in the detail.
I can remember in the 80’s we were paid on quarterly production and bonuses paid on projected Business flows, which was a unmitigated disaster for cashflows, as there were clawbacks if the Companies criteria was not met.
Sustainability comes back to some simple service structures.
1) Make it easy to purchase
2) Make it easy to increase
3) Make it easy to administer
4) Make the pricing easier on the budget e.g. no 15% or higher price hikes
5) Make it more efficient to get ‘on claim’ clients back to work.
Clients are what makes sustainability easy or hard.
They want and demand service and products that fit into the 1 to 5 criteria as above.
If we tinker with ‘strategies’ rather than fix the problems, we will just be digging a deeper hole.
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