Advisers Value

Advisers add value

Life companies traditionally assess the value of their advisers by simply considering how much business each adviser has the potential to write for them.

Those adviser firms with processes in place to generate large volumes of new business are comfortable in the knowledge they will be well treated by life companies hungry for their business.

There are certainly a number of high-volume, high-quality adviser firms in existence. However, there are many more firms that may not generate significant new business volumes, but whose processes and practices ensure the highest quality advice to their clients. Unfortunately, the value these advisers bring to life companies has not been traditionally as well recognised as the volume of new business.

This is despite the fact that the processes these adviser firms have introduced have the potential to add significant value to the adviser firm and to the life companies they choose to partner with.

In addition to volume, there are four key areas of value.

Application completion rate

From an adviser’s perspective, any time spent prospecting, selling and administering an application that ultimately does not proceed, has a cost in terms of wasted time and missed opportunities.

From the life company’s perspective, the rate of applications completed is also vitally important. Every application costs the company money to process, particularly if expensive medical evidence has been acquired.

Advisers who manage their ‘pipe-line’ business effectively – to maximise their application completion rate – will not only maximise the return on their own time but also will help ensure that premium rates for their clients do not need to be adjusted in the future as a result of the company’s NTU rate exceeding expectations.

How does an adviser effectively manage their pipe-line? Simply by investing in robust processes that ensure outstanding requirements are promptly followed-up, and by having a tested methodology for selling ‘loaded’ terms to clients.

Non-disclosure

From an adviser’s perspective, serious damage can be done to their firm’s reputation if a client’s claim is declined because of material nondisclosure. While the adviser is unlikely to have had any involvement in the actual non-disclosure, their reputation may still be muddied by an irate client. To add insult to injury, if the policy is voided because of the non-disclosure, the adviser may also suffer the indignity of a commission claw-back.

In addition, the company also has to return the premiums to their client while having to bear the full costs of issuing the policy and investigating the claim. Although the commission may be recovered, the other substantial costs can never be recovered.

Consequently, advisers who consistently follow robust processes for limiting the opportunity for non-disclosure can add significant value to their own and their suppliers’ businesses by avoiding these problems all together.

Commission claw-backs

Commission claw-backs are the bane of an insurance adviser’s life, yet they do occur from time to time and must be expected.

From an adviser’s perspective, making sure commission claw-backs are repaid immediately ensures any interest charged on the debt can be avoided. By avoiding a long-term commission debt, an adviser will also be better able to secure new debt or equity financing for their business without the encumbrances an existing debt can create.

From the life company’s perspective, commission debts are also costly, especially if as a result of the debt, the adviser switches their new business to another company to avoid the debt being recovered from their future commissions. The cost of pursuing these debts, in terms of both time and money, is significant.

Many high-quality advisers have adopted the practice of writing out a cheque to repay commission claw-backs if the debt cannot be immediately cleared through their current commission account.

Persistency

From an adviser’s point of view, the least costly source of new business will always be their existing clients, through increases and referrals. In addition, the passive income from existing clients generates cash-flow as well as growing asset value for the adviser’s client base.

From the life company’s point of view, longterm persistency is one of the most significant drivers of profitability. If policies do not stay on the books for a reasonably average duration, then new business acquisition costs, including commissions, cannot be recovered.

Advisers who have robust processes in place to manage arrears and client retention add significant value to their business and the life company’s.

ING Life is proud to partner our existing advisers and we also welcome new advisers who:

• Currently write new business
• Have a book persistency rate of higher than 85%
• Have an application completion rate in excess of 85%
• Repay commission claw-backs immediately
• Follow robust fact-finding and application completion processes.

ING Life – recognising and celebrating the full value of high-quality advice.

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