Insurance commission payments in firing line
BROKERS and insurance companies look like they are going to be next in line to feel the heat from the fallout of the economic collapse that has hit all and sundry. In a hard-hitting speech to be delivered today, senior life insurance regulator with the Central Bank, Mark Burke, is to dish out some stark home truths.
He will tell the delegates at the Life and Pensions Industry Conference, organised by Eunan O'Carroll (pictured below) of Core Consulting, that large-scale consolidation is likely among life and pensions providers.
A massive decline in new business is being blamed for the cull.
But it is the thorny issue of commissions that is set to bristle most with the delegates from brokerages and life companies.
Mr Burke calls for nothing less than a change in the business model that encourages so much churning – this is where consumers are encouraged to drop a policy and switch to another provider to generate new commissions.
With so little new business about, this is the main source of revenue for life companies and brokers alike at the moment.
Less commission should be paid up-front when a policy is taken out, and instead the commission payments should be stepped to encourage what is called persistency, Mr Burke will tell delegates.
Mr O'Carroll will defend the commission system, but concede that the timing of when commission is paid can change.
There seems to be no mood in this country to copy what has happened in Britain, where commission has been banned.
Despite that, the winds of change are blowing here when it comes to commissions and how they are paid.