Latest Poll – Risk Advice Service Fees?

Our latest poll is based around a proposition that insurers should consider compensating advice practices for the time and effort they devote to managing books of life insurance business.

The idea was raised by Bombora chief, Wayne Handley, at the MetLife Industry Round Table, which Riskinfo has been reporting in recent weeks.

Historically, the notion of advisers charging insurers a fee for the considerable time and effort involved in managing a risk book would have been unthinkable. Until very recent times it has been accepted without question by all key stakeholders that compensation for servicing an existing book of risk clients and assisting them at claim time is funded through renewal or ‘service’ commissions.

Since the imposition of commission caps under the Life Insurance Framework reforms, however, a vast number of risk-focussed advisers in particular have declared there’s simply not enough overall funding within a mandated 60/20 commission model that can adequately cover the significant and ongoing work that advice businesses undertake in managing and retaining existing clients as well as serving their needs at claim time.

The burden on advice practices has also weighed more heavily in recent years as a direct result of spiralling compliance requirements leading in turn to even more time and effort required of mostly small businesses to manage, maintain and retain current clients.

What might have been considered an outrageous idea …may perhaps no longer be the case

What might have been considered an outrageous idea even a few short years ago, then, may perhaps no longer be the case.

…And please note we’re not asking whether you support the idea of an administration service fee to be paid to advice practices by insurers for the work they do on client books – it’s just too early and there’s not enough meat around the bones of the idea. Instead, we’re asking your view on whether you think the idea should be debated further – whether it has merit.

…the entire remuneration model for life insurance advice needs to be revisited

We note also, that Handley is not advocating an administration service fee as a panacea for the commercial challenges confronting the risk advice sector. Rather, he told the Round Table panel, he believes the entire remuneration model for life insurance advice needs to be revisited and this is only one idea he thinks is worthy of further discussion as a potential element within a broader solution.

We’d love to know what you think. Some may consider the entire notion to be basically nuts – that the idea of insurers funding advice practice admin costs is and will remain ridiculous. Others, however, may hold the view that the idea is one that should reasonably be explored, especially given the real-life circumstances confronting the advice sector in the second half of 2023.

Tell us what you think and we’ll look forward to reporting back next week…