Originally Posted by Newby
The policy fee does have a legit purpose for companies. I used to wonder why they had it if they pay us commission on it. But it's a way they can offer a more competitive premium on larger cases but add more profit for themselves on the tiny cases where their profitability usually takes a hit.
With no policy fee a Company much prefers $100,000 premium written on 100 cases over $100,000 premium written over 250 cases.
With a policy fee it evens it up a bit more because they are collecting more premium per dollar of death benefit on small cases than they are on larger cases.
I almost posted something to this effect.
Basically the policy fee levels out the fixed costs between policies. The cost to underwrite and service a policy is relatively fixed. It does not change based on the face amount for that policy form.
As to whether it is commission-able or not, it really doesn't matter. Companies basically figure out what they want agents to make and then tweak the comp plan to fit.
Of course, the rubber then meets the road and agents find all the loopholes and flaws in the comp plan.