LIFE INSURANCE COMMISSIONS - On Being Remunerated More Than Once - or 'Let's Twist Again Like We Did Last Summer'
Some of you may recall - many moons ago when Financial Alert was still in print format (or if you're even older, to remember Sam Cooke's great song in the title) - that an occasional article used to appear under the pen name of the Laird of Takapuna. Since then much water has flowed under many bridges, and via a long circuitous route, the said Laird now finds himself resident in Albany, on Auckland's North Shore.
On the same arbitrary and absolutely unilateral proclamation basis that the Takapuna title was acquired, I hereby claim the title of Laird of Albany.
It is a well-known fact that views, opinions, and diatribes which emanate from Northern climes are of greater weight and moment than those which emanate from any other part of the land.
So it shall be with these epistles, to which I solemnly commit to issuing weekly.
Of course, some from other parts may dispute the validity and veracity of the views expressed here - and being an avid supporter of free speech, I encourage and welcome response from all quarters.
The knotty issue of commission in the life insurance industry has been given more air-time recently, with the my former colleagues in the Australian industry introducing a 3 year commission clawback period - 100% in year 1; 75% in year 2; 50% in year 3.
For my money, the dedicated 'churners' will merely bide their time until the end of the 3rd year and tally ho! - off they will go again.
The South African industry, I'm given to understand, doesn't pay any new business commission if a life policy is replaced with another containing the same benefit levels and structure.
Now, that makes sense to me
In truth, I don't believe churning is a huge problem in Australia, and I suspect it doesn't exist in the Republic.
However, there is anecdotal evidence to suggest that the practice does exist in Aotearoa in some significance.
The establishment of Partners Life, and the runaway success the newcomer has enjoyed, has been accompanied by suggestions of wholesale churning by some advisers.
Justified or just sour grapes?
Probably a bit of both. There's no doubting Partners spectacular progress - some might say too spectacular (see question above) - and there's also evidence of higher than normal lapses occurring elsewhere, which is likely to be more than mere coincidence, I suspect.
But while the matter of commission levels and churning may occupy some attention in industry media circles, I doubt if it's high on the agenda anywhere in the Beehive.
However, the issue of the FMA's interest in the practices of Financial Advisers - non-AFA's - may be quite a different matter.
Registered - but not Authorised - Financial Advisers may well have to take a closer look at their legal and regulatory obligations - before the FMA pays a visit.
From the distinct lack of noise from the Dispute Resolution providers, there may not be too many clients concerned about policy replacement habits followed by some advisers - after all, there are instances when this can be justified. But the remuneration which this attracts could well be the subject of closer examination by the Sheriff and his deputies.
Of course, I could be entirely wrong, and regulatory oversight in our industry could well diminish in the months and years ahead.........................