Just how much DID YOU PAY your insurance broker?
Happy New Year! Hope you are rested and re-energised for 2009.
We’re going to start the year on our high horse (again) about people who earn their income from commission. This time we’re going to take a swipe at the insurance industry. (In a previous post we were disgruntled with mortgage brokers.)
On a client’s request we went looking for details on exactly what portion of their premiums went to the broker as commission. Relatively straightforward you would think. After all, real estate salespeople are upfront about their commission, even mortgage brokers are upfront about their commission. But we can’t get a straight answer from an insurance broker. And, the insurance company won’t tell us either.
We even contacted the Privacy Commission. Seems there’s no legal obligation to disclose exactly what commission is paid. We don’t like that! Fancy paying someone for a job but they won’t tell you whether you’re paying $10 or $10,000. Makes you wonder what they’ve got to hide. What’s all this secret squirrel stuff about? Is that a good way to build trust and integrity? I don’t think so.
We think it’s abhorrent the commission isn’t disclosed - even worse the broker will probably side-step when asked. Try it and see! Ask your insurance broker how much commission you’re paying them. I’ll bet they do the soft shoe shuffle. You won’t get a straight answer.
We’d be really interested to hear what you think of this. We’d be even more interested to hear what happens when you ask your broker “Hey, just exactly how much commission did you get, and how much are you still getting, from the insurance policy you sold us?”
Send us an email, or leave a comment on the blog, and let us know, we’d love to hear.
If you’d like to read more on this subject, our July 2008 issue of Recent Focus talked about this topic, or check out our special report .
Do you have any questions? Please don’t hesitate to contact us. We’d be happy to discuss them with you.
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David Martin
Kathy Martin
Just how much DID YOU PAY your insurance broker? was interesting. You seem very knowledgeable in insurance broker companies.
Thanks for your comment. Yes, we are knowledgeable - having over 60 years collective experience working for owners of private companies .. where we often come across situations where an advisor (broker or otherwise) acts more in their own best interests than that of our client.
Watch this space as we help our clients to gain their power back … merely by full and accurate disclosure on all matters concerning their personal and financial affairs! NO ONE SPENDS OUR CLIENTS MONEY WITHOUT TELLING THEM EXACTLY WHAT’S SO … be it insurance brokers, banks, professional advisors … to name but a few of the potential wealth predators circling our clients at any one time!
I loved Just how much DID YOU PAY your insurance broker?!
As an insurance broker I am paid by the insurance company (whose policy (s) are used to solve a problem), not the client as such.
More important than the amount of commission (no-one works for free in this world!!)is the question “will the insurance work at claim time”???
It is imperative that the right products are provided to address the clients’ own circumstances and that documentation clearly states why & how etc etc…
So, it is my belief that if the insurances put in place are the best for a specific purpose AND they work when required, then that is my role!!!
And, yes, I expect to be paid for that advice!!
An interesting point. BUT! if the broker were an employee of the Insurance company and was paid a salary only; you wouldn’t be entitled to find out his salary.
When the mechanic fixes your car you can’t demand to know what he is paid. You are only allowed to know the total cost of the job.
What’s so different about insurance brokers?
In response to Glenn’s comment:
Most brokers/agents are confused about who pays them. Most think it’s the insurance company. Rubbish.
We certainly DO believe the client pays the broker/agent. It may come via the insurance company BUT if the broker/agent charges 150% commission on the first years premiums instead of a lesser commission (or even no commission) then that extra %age falls into the broker’s/agent’s pocket … not the insurance company’s!
The broker/agent is spending the client’s money without telling them what they’re spending it on … and the client, in general, doesn’t know enough about the insurance industry to know how it works … they don’t know how much they’re paying you, or for how long they’re paying you. We think they should know.
The client should have FULL disclosure and be shown some alternatives. In some cases we’ve facilitated, the alternatives have saved clients more than $20,000 over the first 10 years of the policy. And we most certainly did NOT do it for free!
We are certainly NOT suggesting that you shouldn’t get paid for your advice. Of course you must get paid! No argument there. And we agree, insurance products should be put in place that are the best for the individual clients needs, and with confidence that the pay out will come when there’s a claim. No argument there either.
HOWEVER if you can provide the exact same insurance policy to a client for $50 a month instead of $100 per month, but YOU decide the client should pay $100 (because it means you’ll get more commission) don’t you think the client has a right to be aware of this? And anyway, what’s to hide? … they know you’re not doing it for free - you’ve got to earning a living, right?
BUT don’t you think the client should be shown some alternative, tax-deductible ways to do it .. ways in which both you and the client get to win?
In response to Mike’s comment:
Thanks for your interest. We think, though, that your first comment might be a moot point, since insurance brokers innately are NOT employees of insurance companies (or they wouldn’t be “brokers”).
Your analogy to the mechanic also confuses us …. every mechanic’s bill we’ve ever received had the total cost of the job broken down into just how much we paid for parts, and how much was for labour. ??
Just how much DID YOU PAY your insurance broker? was a perfect blog in the world of insurance broker companies.
Just how much DID YOU PAY your insurance broker? was a perfect blog in the world of insurance broker.
Hey!. Just how much DID YOU PAY your insurance broker? was very well written.
Just how much DID YOU PAY your insurance broker? made some good points. I did a search on insurance company broker and found most people agree with your blog.
Just how much DID YOU PAY your insurance broker? was a perfect blog in the world of insurance company broker.