Life insurance agents getting 230% upfront commission then 10% per year

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timmmay

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#154606 2-Nov-2014 09:35

From this story.

Upfront commission generally ranges from 170 to 200 per cent of the first year's premium, with the adviser also getting a far smaller annual commission, about 7 to 10 per cent of the premium paid. One financial adviser, who did not want to be named, said 230 per cent was a "new high".

That makes me trust insurance salespeople even less! How much less could those premiums be if they didn't have sales people and instead had a direct model?

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#1166777 2-Nov-2014 09:41

About 10%! Don't assume that the life insurance companies would just give that margin back to you..!

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ckc

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#1166799 2-Nov-2014 10:25

We went with a broker after being directed there by AXA. He just seemed to regale us with stories of clients of his who'd had crappy luck and were either insured or not insured. Unfortunately, AXA either had stupid and nonsensical policies or he was trying to direct us toward a policy that was better for him than us. So we decided against AXA and a broker, because he was a dick and we didn't trust him. After that experience we won't do anything except direct buy.

I think actually, the insurance companies make the purchase such a fraught and complex experience that once you're insured you won't want to go through that again.

Geektastic

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#1166805 2-Nov-2014 10:46

I've given up trying to get Life Insurance anyway.

I had applications deferred non-stop for a number of years, to a number of providers, due to heart surgery and reached the point of saying to the broker "why don't they just tell me how long I have to stay alive before they will cover me?!"

I'm probably in breach of the mortgage small print, but if no one will cover me there isn't much I can do about that.

timmmay

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#1166806 2-Nov-2014 10:49

Your mortgage says you have to have life insurance? Mine says house and contents insurance, but since they have collateral life insurance would be an unusual requirement.

MikeB4

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#1166807 2-Nov-2014 10:50

If you cancel a policy in x number of years the Agent has to repay the commission, so there is a bit risk on the agents behalf.

ckc

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#1166811 2-Nov-2014 11:07

Geektastic: I've given up trying to get Life Insurance anyway.

I had applications deferred non-stop for a number of years, to a number of providers, due to heart surgery and reached the point of saying to the broker "why don't they just tell me how long I have to stay alive before they will cover me?!"

I'm probably in breach of the mortgage small print, but if no one will cover me there isn't much I can do about that.

I remember him saying that, along the lines of that under the law they can't refuse you but they can defer cover indefinitely. I think it's a de facto refusal to do that, but I guess each case would have to be independently challenged to prove it, so.

Geektastic

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#1166814 2-Nov-2014 11:13

timmmay: Your mortgage says you have to have life insurance? Mine says house and contents insurance, but since they have collateral life insurance would be an unusual requirement.

Not sure whether it does. I know it is usually a standard requirement in the UK because banks dislike chucking the rest of the family out on the street in the event of your death if the survivor cannot afford the mortgage. It makes for bad publicity!

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#1166824 2-Nov-2014 11:33

I recommend Lifedirect. Owned by TradeMe. All the policies of various insurance providers in NZ, their commission rates to Lifedirect, financial ratings etc are outlined and explained very well. Partners Life offers best bang for buck Life + Medical insurance. One of only 2 providers (other being OnePath from ANZ but more expensive) that offers guaranteed wordings with their policy for life so 20 years later your cover for say a CT scan that one insurance company might offer $4000 now in cover will not be reduced to $1500 20 years later.

http://www.lifedirect.co.nz/health-insurance/

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#1166842 2-Nov-2014 12:03

it's placing a bet around your life.

you are betting that you die the company pays you xxx,xxx,xxx

either way, it works. i have 3 kids under 7

SaltyNZ

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#1166855 2-Nov-2014 12:32

timmmay: Your mortgage says you have to have life insurance? Mine says house and contents insurance, but since they have collateral life insurance would be an unusual requirement.

We had it as a requirement on the mortgage for the previous house. Not a requirement anymore, but we're keeping it anyway. That way if someone pushes me off a bridge my wife will be able to pay off the house.

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Bee

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#1166867 2-Nov-2014 13:41

Disclaimer: This is the industry I work in, so you may think Im biased a bit... (I dont ;) )

The Financial Adviser is supposed to be an independent person giving you advice on what to do with your money etc and sell risk insurance. since the customer doesnt pay them, Life insurance Commission is their main source of income.

They know all the life insurance companies in the market and are supposed to get a policy with the company that is the best fit for you... but I bet they will never tell you if they are actually doing that or getting you to go with the one that offers the most commission for them.

Insurance companies pay 170%-200% commission upfront to the adviser when the policy is issued, on the condition that if you cancel the policy within 2 years, then the adviser will pay it back... if you add up the cost of commission, plus staff , plus a building and power etc, an Insurance company typically wont make any profit unless you keep the policy for between 3-5 years...

After 2 years however, if you get the call from your adviser that they want to move your policy to another company - you know they are just after more commission... Seems cynical but this DOES happen. and frequently...

At 230% commission then, the insurance company that holds your policy is making a loss and the Adviser is making real good money!

Are independent financial advisers really independent or just looking after themselves ???

This is the way most people in NZ get their life insurance... No other country in the world has so many IFA's with such high commissions as far as Im aware...

Life direct is a better model then... you choose which company you want to go with without any "help" from someone who may be motivated by their own wallet...
Life direct of course, do get commission from your policy but its not even close to 170% and they don't influence you at all...

The bigger problem of course is that not many people want to buy life insurance, so the part of the advisers job is to persuade you to buy life insurance where you otherwise wouldn't...

Doing your best is much more important than being the best.

Kyanar

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#1166878 2-Nov-2014 14:02

Bee:
This is the way most people in NZ get their life insurance... No other country in the world has so many IFA's with such high commissions as far as Im aware...

I suspect Australia does. If you look at LifeDirect's commission rates, the only health insurance company to pay commission above 50% is Nib. Combined with the fact that the majority of the life insurance companies in the list are based there as well...

Geektastic

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#1166972 2-Nov-2014 17:06

SaltyNZ:
timmmay: Your mortgage says you have to have life insurance? Mine says house and contents insurance, but since they have collateral life insurance would be an unusual requirement.

We had it as a requirement on the mortgage for the previous house. Not a requirement anymore, but we're keeping it anyway. That way if someone pushes me off a bridge my wife will be able to pay off the house.

"Someone "?! ☺

mattwnz

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#1166986 2-Nov-2014 17:47

timmmay: From this story.

Upfront commission generally ranges from 170 to 200 per cent of the first year's premium, with the adviser also getting a far smaller annual commission, about 7 to 10 per cent of the premium paid. One financial adviser, who did not want to be named, said 230 per cent was a "new high".

That makes me trust insurance salespeople even less! How much less could those premiums be if they didn't have sales people and instead had a direct model?

That is pretty much the same with any job that pays on commission. That is why I try to minimise buying where the person selling the product, is being paid on commission, as they will often do anything to try and make the sale. You do hear the most complaints from companies who have sales people being sold on commission. eg door to door salemen.

MikeAqua

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#1167369 3-Nov-2014 10:34

Maybe brokers should required to disclose they commission benefits they get on every single policy they recommend.

Mike

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