Commissions

We designed commission rules that anticipated a relatively large number of rollovers of existing policies;.
- ..full commissions are paid provided the new Universal Life face amount is at least two times the face amount of the replaced policy.

-- Phillip B. Norton, not a member of the Society, is Vice President of The Lincoln National Life Insurance Company

1986 - SOA - Individual Life Insurance Retention and Replacement Strategies, Society of Actuaries - 24p

1976-2, NAIC Proceedings - p558- - Agents Compensation Systems (C3) Industry Advisory Committee - June 8, 1976 - FIRST REPORT

The straightforward way to remove these conflicts is to have the agent's services paid for directly by his client, regardless of what plan or volume of insurance is chosen. It would be desirable, but perhaps not practicable_
to have the agent compensated for services even when a sale of insurance does not follow.
The agent would offer his services to clients as a financial counsellor or insurance specialist. His charges would be on some fee for service basis such as $200 plus $80 per hour of time spent directly on the client's insurance counselling.
- There would be no commission paid by the insurance company even if life insurance is applied for and issued as a result of the agent's work.
This same principle could be extended to the later years of the policy whenever the agent advises his client on his ongoing insurance situation.
Our studies show that by transferring the agent's compensation from the premiums for life insurance to the client directly, it is possible to compensate the agent adequately for his activity and reduce the cost of insurance substantially as well.

-- J. Ross Hanson

1976 - SOA - Agent's Compensation: Individual and Group Aspects, Society of Actuaries - 23p

On the high side of the commissions, I am aware of commission scales running significantly above 100% of target premium in the first year.
Leaving aside my personal biases about commissions exceeding 100% of premium, I am amazed at the apparent competitiveness of some of the products offering these commissions.
My conclusion is obvious, such products are either underpriced or illustrated unreasonably -- maybe both.

-- Rex D. Hemme, with a subsidiary of Lincoln National Life Insurance Company

1989 - SOA - Mass Marketing -- Competitive Strategies, Society of Actuaries - 14p

[Commission Disclosure]
Angele KHACHADOUR (attorney with the firm of Miller & Daar, Mill Valley, CA): The moment you talk about disclosing one portion of that premium, you're going to have to start disclosing the rest of that premium and the allocation of every penny in that dollar.
- It's not fair to identify just the agent's compensation, and have him confess publicly to getting 100% of the first year premium.
- We agreed earlier that the buyer just looks at the overall price.
Barbara LAUTZENHEISER: The consumerists I have heard talk, seem to be more concerned about the compensation to the agent than they have been about other specific costs within the policy.

1981 - SOA - The Life Insurance Business---The View of Consumerists (rsa81v7n17), Society of Actuaries - Daphne Bartlett- Moderator - 16p

1973 - AP - Problems in Agents' Compensation, by Harold G. Ingraham, Jr., The Journal of Risk and Insurance, Vol. 40, No. 2 (Jun., 1973), pp. 191-208 (18 pages), Published By: American Risk and Insurance Association - [JSTOR]
1976-4, NAIC Proc. - Life Agents' Compensation Task Force
1979 - SOA - Future Trends and Current Developments in Individual Life Products (rsa79v5n44), Society of Actuaries - 24p
1981 0921 - GOV (House) - Insurance Agent Commission Deregulation - [PDF-109p-GooglePlay,
1983 - SOA - Individual Life Insurance Retention and Replacement Strategies, Society of Actuaries - 24p
1990 - LR - Statutory Prohibitions on the Negotiation of Insurance Agent Commissions: Substantive Due Process Review Under State Constitutions, Robert H. Jerr, II and Reginald L. Robinson - 50p
1990 - SOA - Designing a Field Compensation Structure, Society of Actuaries - 22p
1998 - SOA - Insurance Compensation Trends and Outlook, Society of Actuaries - 27p

Mr. Birdsall asked if the agent compensation structure for IUL products provide greater incentives for agents than is provided by the compensation structure of traditional universal life (UL) products.
Mr. Samuelson (MetLife) said that a compensation study he had previously conducted found that, on average, IUL policies have a target premium 80% higher than the average target premium for UL products.

2014 1114-15, NAIC Proceedings - IULWG - 6-63

William Albus (National Association of Life Underwriters - NALU) commented that:
- ...the requirement for disclosing sales commissions is unnecessary because it is superfluous and would only confuse consumers.
- ...the purpose of disclosure is to provide information for making an informed decision and the disclosure of sales commissions has nothing to do with making this decision.

1988-2, NAIC Proc.

From a distribution perspective, I think one of the challenges that face us in UL is the servicing of UL.
- Flexible premium, high-degree-of-service UL products have little or no renewal compensation paid if there’s no premium paid.

-- Daniel F. Byrne, M Financial

1999 - SOA - The Next Generation Universal Life, Society of Actuaries - 30p

The other question I have, coming from the standpoint of a mutual company, is that with our agency system it would be hard for us to replace whole life insurance with a commission rate that is around the level of a YRT commission plus 3% of premium.
That is about 10% of what we are now paying in the first year on a permanent insurance plan.

1979 - SOA - Future Trends and Current Developments in Individual Life Products (rsa79v5n44), Society of Actuaries - 24p

Longer guarantees with corresponding higher gross premiums further increase commissions.
There is an incentive for agents to sell longer guarantees even when they are not needed.

-- Brian Kavanagh

1995 - SOA - Life Valuation Issues -- XXX / Regulation 147, Society of Actuaries - 16p