Fee for Services / Consulting

Jesse included in his comments an indication that  the industry would trend towards levelized commissions and perhaps a fee for the extra service performed in the first year.

  • Didn't we see that there was an opportunity for the industry to move towards an extra fee with the Universal Life product?
    • Didn't we lose our chance with the trend towards high first year commissions on the Universal Life? 

--  Paul Overberg

1983 - SOA - Individual Life Insurance, Society of Actuaries - 22p

  • 1987 - SOA - The Flexible Compensation Market, Society of Actuaries - 24p

She further noted that the amendments would require disclosure to consumers if fees were to be charged in addition to commissions for the sale of insurance.

The chair then called for comments.

  • Jack Burbidge (IDS Life Insurance Co.), chair of the advisory committee, noted that the advisory committee had not met since May 19 and that, therefore, it would be impossible to speak for the group.
    • It was his understanding, however, that the advisory committee was generally in favor of the amendments, but did worry that the amendments as proposed could conflict with some states' insurance consultants laws.
    • He noted that 27 states have consultant laws which are not uniform and which could be in conflict with the amendments as proposed to the Model Unfair Trade Practices Act.
    • He noted that he had suggested an amendment to the exposure draft proposal (Proceedings, 1989, vol. I, pp. 85-86) in a June 2.

1989-2, NAIC Proceedings

Fee for service still is a very new and novel approach, as most of you are aware, but it is something that is evident in the marketplace.

  • I think LIMRA, in a study which they completed last year, said from 10% to 20% of all agents out there do charge fees.
  • You will find that many agents who are charging fees, on top of the normal commission products, are not willing to cut their commissions immediately.

--  Fred Jonske

1984 - SOA - Individual Term Portfolio Management, Society of Actuaries - 22p

  • The other thing you will find is that the surge in that direction will also be somewhat impeded by states.
    • There are a number of different state laws regarding fees for service.
    • Not all states allow an agent to charge fees, and they run the gamut from some states stating that if you charge a fee, you cannot recieve a commission to others permitting the agent to receive both.
    • If you charge a fee, you may have to be a licensed consultant.
      • That is a problem.
    • Also, if you don't have a separate company set up to handle "fee for service" business, you may find some states hesitant to permit you to have two products side-by-side, one that is fully loaded for commission, and another one that is discounted for the lack of commissions.
      • This is because a few states disregard the difference in the allocation of distribution costs and perceive this as discrimination.

--  Fred Jonske

1984 - SOA - Individual Term Portfolio Management, Society of Actuaries - 22p

  • 1978 GOV Moss Report
    • (p16) - Finally, we recommend that the NAIC, the FTC, or both, study how to encourage (a) the development of professional insurance consultants who would provide advice to consumers for a set fee, and