Google
RSS Feeds RSS | Views on ITInews | contact | terms of use | privacy 
 


Editorial Categories:

FINANCIAL SERVICES
ADVISERS & BROKERS
BANKING & BONDS
BUSINESS MANAGEMENT
COLUMNISTS
CONSUMER AFFAIRS
CRIME & FRAUD
ECONOMY & GLOBAL
EDUCATION & TRAINING
ESTATES & WILLS
HEALTHCARE INSURANCE
INDUSTRY & LEGISLATION
INSURANCE
INVESTING
LEGAL AFFAIRS
LIABILITY INSURANCE
LIFE INSURANCE
MARKETING
PEOPLE & COMPANIES
POLITICS
PROPERTY
RETIREMENT PROVISION
REVIEWS
ROAD ACCIDENT FUND
SHARES & UNIT TRUSTS
SHORT-TERM INSURANCE
TAXATION
TECHNOLOGY
VIEWS & LETTERS


Forthcoming Events:

No Upcoming Events



Save by getting insurance quotes


Proudly South AfricanInforming Consumers and Financial Advisors since 1988 | Click Here to Advertise
Car, household, life and business insurance quotes

News Article : Smoke screen
Category: Advisers & Brokers : Commission & Fees
Author:Nigel Benetton
Email:[email protected]
Posted:06 Sep 2005

 Email this article Comment on this Article  Print this article

Ludicrous proposals, says IBC

The Insurance Brokers’ Council (IBC) says it rejects proposals for changes to life office commission structures, put up for discussion by the industry in June.

The IBC, which represents some 4 000 independent brokers, does not believe they “holistically address the policy cost issues that face the consumer.”

IBC president, Johann van Rensburg, points out that, “Broker commissions account for only 34% of the total costs on policies.”     

The balance of 66% is imposed by the life offices as follows:

  • 29% – insurers’ distribution costs (not including broker commission);
  • 25% - maintenance and investment charges;
  • 9% for profits; and,
  • 3% for tax.

“To insinuate that broker commissions are the exclusive cause of poor value in insurance policies is simply ludicrous,” he fumes.

“Our view is that the LOA has consistently used broker commission as a smoke screen to divert attention away from their own costs and to protect the interests of its members.

“Consequently the LOA proposals focus only on the change in commissions from an upfront model to an as-and-when model. But no mention is made of the very necessary amendment to life office costs and charges. The IBC thus sees the initiative as narrow in that it only affects brokers.”

He adds that the LOA proposals, if adopted by National Treasury for implementation, will without doubt severely impact the entire industry. “And we are convinced that several hundred small brokerages will be forced to close.” The IBC notes the recent move by Momentum to acquire Sage, and says this proves the point there will be fewer brokers. Sage had a 500-strong agency force.

What he terms ‘downstream consequences’, will include:

  • Huge job losses. The average IBC broker employs four staff, so as many as 30 000 people could be dumped into the economy, according to the IBC;
  • A tremendous impact on consumers with fewer brokers actively educating them and encouraging them to make provision for retirement; and,
  • A serious blow to the already poor savings culture in South Africa.

Mr Van Rensburg says this is not in the best interests of the consumer. Although life offices and banks will assert their clients’ interests are always paramount, bank brokers are often subject to mandates requiring them to place 80% or more of their business with their principals. Tied agents are placed under similar pressure.

Independent brokers, on the other hand, are a consumers’ only source of truly independent financial advice. The IBC believes the proposed commission changes will thwart this by reducing their numbers.

However, the council says it supports any change that would be fair and benefit all stakeholders: brokers, assurers and their clients. For this to happen there needs to be open dialogue and participation on the part of all stakeholders.

“We want to see the maintenance of a sustainable industry,” says Mr van Rensburg. “Surely, if we are to find a solution we must accept that it would be unreasonable for brokers to make all the sacrifices.” Life offices must also make concessions by, for example, reducing their charges to the consumer.
     
To this end, the IBC is engaging on extensive research, both locally and internationally, to prepare a submission to government. It hopes this will serve to place decision makers in a ‘far more informed position’.

“In the interim, we reject the LOA proposals and strongly question whether indeed they are a step in the right direction.”

Comments:
There are no comments at this stage. Be the first to comment!
Please Login To Comment On an Article - Click here To Login

ITInews invites comments at the foot of each of its articles in which readers can respond freely - anonymously if they wish - to various topical issues and industry debates. However, comments submitted by readers that are defamatory or deemed, by the editors, to be racist or obscene will be deleted from the database. Furthermore, ITInews's editor would like to caution potential posters on its websites that while it welcomes robust debate, it will not hesitate to make the IP addresses of the authors of such defamatory statements available to the authorities, in the event of a court order compelling them to do so.



Get car, home, life and business insurance quotes in 3 easy steps



Join us today

Insurance Quotes


Car Insurance Quotes
Household Insurance Quotes
Business Insurance Quotes
Funeral Insurance Quotes
Life Insurance Quotes

Read the InsuranceQuotes Blog

Advisers & Brokers - Commission & Fees
Best Advice
Commission & Fees
Compliance
FAIS Registration
National Lobby
Networks

More in Advisers & Brokers : Commission & Fees
The FSR Bill must under go a socioeconomic impact assessment (SEIA) to protect consumers
Consumers rights and interests are scarcely mentioned
Old Mutual responds to excess fees criticism
System defaults and the epidemic of one
Joint Brokers Forum statement on CMS remuneration proposals for healthcare intermediaries
JBF opposed to any proposals that would contravene fair competition
Unintended negative consequences for many
BHF statement questioned
Insurance Commission Regulation: Inappropriate and Undesirable
Global trend concerning commission is one of deregulation combined with increased disclosure
Transition arrangements for new commission dispensation
Broker comments
Letter to the Editor
Banging your head against a wall burns 150 calories an hour
It seems that the independent broker is on a hiding to nothing
We need to really have our views heard or the independent will largely disappear
Behind the IGF
A question of guarantees
Letter to the Editor - some form of reform is needed
Proactive engagement with the LOA, FSB and National Treasury is needed
Life Assurance Costs
Broker wrangle
On the table
The industry finally agrees to review practice
Two sides
What about life company charges?
Reforms at last . . .
A bit of history


Available Recruitment:
No Vacancies Listed...


ITM Website Design Cape Town
Copyright © 2005 - 2015 ITInews Online Publications (Pty) Ltd. All rights reserved Insurance Times & Investments Online and ITInews. ..::ISSN 1995-1256::.. No part of the materials including graphics or logos, available in this Web site may be copied, photocopied, reproduced, translated or reduced to any electronic medium or machine-readable form, in whole or in part, without specific permission from ITInews Online Publications (Pty) Ltd. Distribution for commercial purposes is prohibited.