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  #31  
Old 01-05-2010, 01:03 PM
Dumbdumb Dumbdumb is offline
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Originally Posted by _BullDog_ View Post
why is it wrong to sell product B? Perhaps teh comp is higher becuase company B has lower expenses.

The other issue is that most of the agents have titles like Financial Advisor, while their jobs are closer to used car salespersons -> sell the person infront of you a product, starting with what is best for the slaesperson and working from there.
It's not wrong - you're correct. My point was that commission on most insurance products should have NO bearing on the sale - because it has no bearing on the appropriateness of the product for the consumer. In many cases higher commissions = higher price = poorer product for the consumer. This is not the case with life insurance.

As to your point about Financial Advisor moniker, you are absolutely correct. If they're an accountant, then you're going to get sold tax planning. If they're licensed to sell life insurance, then financial advisors will sell you life insurance to solve all your problems. If they're investment licensed, financial advisors are going to sell you investments to solve all your financial problems. It's really something that should be regulated IMO. Or maybe not regulated - but clarified somehow. Because the title Financial Advisor title is nothing more than a title used to conceal bias in product sales.
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  #32  
Old 01-05-2010, 01:26 PM
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There do exist some advisors who work on a fee-only basis. I have no idea how to find one, though.
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  #33  
Old 01-06-2010, 01:43 PM
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A most difficult thing to do, is to be a hard-nosed watch-dog trying to enforce a nebulous concept or principle, that is not clearly illegal, that virtually everyone else does to great gain, and that in fact will have no meaningful positive effect on anyone if you do.

In my past, two examples come to mind - trying to be hard-nosed about pre-XXX unitary reserves on term insurance (in my mind a clearly inappropriate interpretation of the SVL) and on lapse supported gimmicky sales illustrations prior to the model illustration reg (which I felt were clearly misleading). Lapse supported pricing of various kinds is another.

I still try to discourage things I think are wrong. But what did those previous stands accomplish? Nothing but to reduce market share of my company to the benefit of others in the market who were not so compelled (and to the detriment of the customer in many instances).

It seems that nothing bad ever happens to those not so compelled. As a pricing actuary, it sounds like you ask us to do your job because it is too difficult for you to do. It is even harder for us to do.

Chuck
I feel your pain. I was a pricing actuary for about 15 years at several companies, large and small, stock and mutual. I'm grateful that most of the time my superiors were supportive and taught me to avoid unfair discrimination.

A locked door keeps an honest man out. The world isn't fair. And cheaters can prosper - short-term (up to about 100 years).

If an insurer offers different guaranteed benefits for the same premium, or charges different premiums for the same guaranteed benefits, it is unfair discrimination.
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  #34  
Old 01-06-2010, 01:56 PM
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I know some insurers have large case departments. If the case is big enough, an advisor can cut their commission, which gets translated into reduced premium.

I've never looked at it in the light of rebating before. But I'd be hard pressed to explain the difference between that practice and rebating.
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  #35  
Old 01-06-2010, 03:22 PM
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Cool large cases

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Originally Posted by Dumbdumb View Post
I know some insurers have large case departments. If the case is big enough, an advisor can cut their commission, which gets translated into reduced premium.

I've never looked at it in the light of rebating before. But I'd be hard pressed to explain the difference between that practice and rebating.
Some studies show lower mortality for large cases. So the size of case can be used to justify placing it into a separate risk class (if the insurer can show that larger cases don't use higher rates). Life and health insurance aren't held to an actuarial equivalence standard, so the lower commission need not be defended if the direction of the difference in rates is defensible by risk class.
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  #36  
Old 01-06-2010, 04:42 PM
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Some studies show lower mortality for large cases. So the size of case can be used to justify placing it into a separate risk class (if the insurer can show that larger cases don't use higher rates). Life and health insurance aren't held to an actuarial equivalence standard, so the lower commission need not be defended if the direction of the difference in rates is defensible by risk class.
Well, defensible or not, it's not done for mortality purposes. The agent calls the large case department and says "cut my commissions from $50,000 to $25,000. What's that do to the premiums?".

The difference between that and an agent handing part of his commission over to the client is just the removal of the large case department from the process (since it's the commission that's being cut, not just the mortality).

I think it's a fine line, and may be even crossed. The saving grace IMO is the intent. Rebating I believe is restricted to prevent agents from paying for business, for clients who wouldn't normally buy the insurance. large case commission cutting is just competitive practices since the client is probably buying the insurance anyway. Even though it still quacks like a duck .
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  #37  
Old 01-07-2010, 09:28 AM
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I feel your pain. I was a pricing actuary for about 15 years at several companies, large and small, stock and mutual. I'm grateful that most of the time my superiors were supportive and taught me to avoid unfair discrimination.

A locked door keeps an honest man out. The world isn't fair. And cheaters can prosper - short-term (up to about 100 years).

If an insurer offers different guaranteed benefits for the same premium, or charges different premiums for the same guaranteed benefits to the same risk, it is unfair discrimination.
IFYP
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  #38  
Old 01-07-2010, 06:03 PM
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IFYP
Thanks, that's clearer.
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