Producer Compensation: What do Clients Need to Know? 

Among several regulators’ proposals to help rein in what some see as an unwieldy life settlement market is the push toward commission disclosure and standardization, with much being made of a handful of agents earning astronomical commission on their clients’ settlements.

While such a move seems logical, most industry insiders have come down strongly against disclosure in particular, with parallels being drawn between life insurance agents and other salespeople. The idea, said Head, is that the more information clients have, the more transparent the transaction will be and the better it will be for the consumer. Some information, though, is simply not relevant, he believes.

“They don’t disclose compensation at a car lot,” said Head. “Will it help sales to know? No. Insurers are advocating for compensation disclosure in the secondary market and avoiding it in the primary marketplace. Disclosure does not help consumers. It’s just a way to say they’ve done what they need to do.”

Robin Weinberger, national director of accounts for the brokerage firm Advanced Planning Services Inc., agrees.

“Sometimes the bad guys make the rules for the good guys,” she said. “But compensation disclosure is opening a can of worms for the insurance industry.”

Similarly, Head feels standard compensation is not an adequate solution, either.

“We feel that standardization of commissions has not been a tradition in the life industry or most other industries, where competition has allowed for various modes of compensation to bring maximum value to the markets and to consumers who can compare when shopping,” he said. “Outside of a few singular states, where the market benefit is not clear, this is not familiar territory to insurers or producers. The concept assumes some approaches to markets that do not seem comfortable within the concept of a free market.”