Full Commission Disclosure

[Brian Anderson]

Should life insurance agents proactively provide full commission disclosure to clients and prospects?

In this new contributed opinion column from independent insurance agent Brad Cummins, the author presents his case for why agents should “pull back the curtains” on a compensation structure many consumers know little about. Please give it a read at the link below, and come back to share your thoughts on the issue.

Insurance Forums | Full disclosure and ethical leadership: A self-imposed standard of excellence for the insurance industry

 

[lifeagent007]

Why is our profession any different from say that of a car dealer, or a medical device specialist, or really any sales person for that matter...

I believe in honesty don't get me wrong, But it'd be like going to a car dealership and the manager is required to tell you how much he bought the car for, how much he is paying his dealer to sell it to you as well as any expenses he has for lighting, rent, etc... Yes Id be nice but how long before that dealership goes out of business??

I say if a customer asks for that information then by all means tell and be honest. However, I can not imagine a world where I go to every appointment and before I begin I MUST disclose what my Commissions look like and if I will qualify for a trip this year etc...


For perspective it would look something like this...


Mr. Smith thank you for taking the time to see meet with me today...

Now before I begin I need to tell you that if you BUY this policy from me I will be making roughly $1,500 and then I will also get paid for as long as you keep this policy active so don't cancel... And you should also know that I will be going to the Dominican Republic If you BUY from me... OK now where were we? Yes... Life insurance....

 

[Newby]

What it would do is change the business model to where the salespeople are on small commissions or no commission at all. The agency owners would make all the money and do all the marketing and the sales people would become lower income clerks.

For instance if the customer was asking two salespeople what they made on similar policies and one said $1,000 commission plus 10% renewals and the other said I make a $50 bonus, the customer would think he was paying to much with the commissioned agent. But it would be the same policy. It will just shift the bigger commissions and the marketing expenses to the agencies. The agent would become more of a clerk.

I also think if they did this, why wouldn't lawyers, doctors, etc. Have to disclose how much they will make on each sale? Doesn't the profitability of what they are doing affect their advice? Shouldn't the consumer be aware of that in their decision making?

 

[Arthur Rudnick]

New York State, being New York State, has had a mandatory disclosure form since 01/01/2011.

99% of clients just sign the form and never ask a question. I have never had someone ask me specifically what I was making on their sale and if I were asked, I'd probably not disclose it and walk away.

Regulation 194: Mandatory Disclosure
​

As required by the New York State Department of Insurance

New York Insurance producers are authorized by their license to;
1) Confer with insurance purchasers about the benefits, terms and conditions of insurance contracts
2) To offer advice concerning the benefits of particular insurance contracts
3) To obtain insurance for purchasers
The role of the producer in any particular transaction typically involves one or more of these activities.
As an independent insurance producer I may have access to more than one insurance company to place your coverage. When acting as an independent insurance producer I have certain obligations to you as the purchaser and certain obligations to the insurance company, as determined in both statutory and case law.
In acting as an independent insurance producer, I may have the authority to obligate the insurance company on your behalf and as a result I may be required to act within the scope of my contractual agreement with the company.
As the purchaser, you need to understand that I typically will receive compensation from the insurance company based on the agreement I have with the company. That compensation may vary from company to company. You may receive additional information about my compensation on the policy that you selected and about any policies I have presented to you which you did not select by asking me for that information.



________________________________ Date: ___/___/___
Producer Signature:



________________________________
Applicant Name:


X_______________________________ Date: ___/___/___
Applicant Signature:


________________________________
Applicant Name:


X_______________________________ Date: ___/___/___
Applicant Signature:

 

[unic.consulting]

Since I mostly do MA/PDP and MedSupps, I have no problem disclosing my commissions. Everyone I've told has asked me why I bother doing it for that small of an amount.

 

[somarco]

It's none of their business.

Some industries require disclosure. ERISA plans generally have a disclosure, I believe it is Schedule C of the 5500. Equity transactions also include disclosure.

And some states allow rebating of commissions. Something I am adamantly opposed to.

Consumers are led to believe that whole life and annuities are promoted because of the "massive" commissions when in fact term insurance (at 100%+) actually has a higher commission rate.

Again, it's none of their business.

 

[sshafran]

Show me one reason of substance to do this... other than it makes that particular agent feel good.

Frankly, uncompelling.

 

[Arthur Rudnick]

originally posted by sshafran

Show me one reason of substance to do this... other than it makes that particular agent feel good.

Frankly, uncompelling.

Unfortunately in NY it's not an option. It's a DOI mandated regulation.

 

[TedBernstein]

This is a very complex issue because of the commission legacy structure. After introducing life insurance without commission to the market in 1985, I can tell you from experience that both a built-in commission and fee based model will become the model going forward. There is a place for both. Full disclosure and transparency will be the SOP in both models. This train has left the station and it is a boost to the professionalism of our industry. The life insurance industry has been suffering from a multi-decade long image crisis. Every stakeholder is responsible for changing the perception of our products, our professionals and our professionalism.

I congratulate the author for raising a sensitive topic that affects many.

 

[sshafran]

This is a very complex issue because of the commission legacy structure. After introducing life insurance without commission to the market in 1985, I can tell you from experience that both a built-in commission and fee based model will become the model going forward. There is a place for both. Full disclosure and transparency will be the SOP in both models. This train has left the station and it is a boost to the professionalism of our industry. The life insurance industry has been suffering from a multi-decade long image crisis. Every stakeholder is responsible for changing the perception of our products, our professionals and our professionalism.

I congratulate the author for raising a sensitive topic that affects many.

I can't see how it is more professional for them to know your commission.

Again... no substantive (factual) reason has been given to disclose what our comp is to our clients. Show me how it will benefit anyone...