Central Bank warns on high payments to insurance brokers
Published 25/07/2011 | 05:00
THE Central Bank has confirmed that it is reviewing commission payment arrangements by life companies to brokers.
This comes after the Irish Independent learned Zurich Life is paying some brokers 160pc of the first year's premium in commission for polices sold.
The payment of high commissions has raised fears that brokers may favour particular companies.
The Central Bank said it was updating its rules to ensure payment structures do not stop brokers acting in the best interests of consumers.
"The proposed new Consumer Protection Code includes a clause that requires a regulated entity to ensure that its remuneration arrangements are not structured in such a way as to impair its obligations to act in the best interest of consumers and satisfy the suitability requirements of the code," the bank said.
Brokers and life insurers are required to ensure any product they sell a consumer are suitable for them, it added.
Zurich is offering some brokers commissions of up to 160pc of the first year's premium, on condition that the policy is not withdrawn within six years.
Industry sources said this was an attempt to stop churning, where people are deliberately switched from one policy to another to generate commissions.
This means a broker that signs up a consumer for mortgage protection with an annual premium of €500 will get €800 if they are offered, and opt for, this scheme.
Some brokers are offering incentives like free TVs or offering to pay €250 worth of electricity bills.