Death of an (insurance) salesman
Authorised Financial Adviser (AFA) requirements around commission disclosure may prove a disincentive for people to seek insurance cover via an adviser, according to Insurance4me founder Des Morgan.
Thursday, April 21st 2011, 7:17AM 
20 Comments
by Benn Bathgate
"If you do what you're meant to as an AFA now and go and say [to a client] you should be paying $600 a month and my commission is $14,000 to do this, they're going to be skeptical."
He also said more transparency around disclosure may make people query the varied amounts of commission brokers can make.
"You're doing the same job to insure a farmer for $3 million as you are doing a family man for $500,000 so why should you be taking six times the commission for the same time?"
Morgan has established his ‘no-advice' online insurance provider to offer significantly reduced premiums by slashing commission rates by 50%.
He is able to offer such significant reductions by placing the onus on the client to analyse their own needs and identify the amount of life cover they need for their own circumstances.
"I'm sending people to the Retirement Commissioner's website, saying you do your own needs analysis and I will discount your premiums for life no matter which company you choose. Premiums over 20 years will go up every year based on age, that's thousands of dollars of premiums. That's a lot of money."
Morgan also said offering cheaper insurance may overcome one of the main hurdles around the country's level of underinsurance.
"After you take away the typical household mortgage, insurance is one of the biggest drains on a family and an individuals income. But by using this website, they can now take advantage of some real savings," he said.
"This means the savings made on insurance premiums can be spent on retirement plans like KiwiSaver, reducing debt, paying off the mortgage or investing in your child's education."
PEOPLE: Who is behind Plus4
Benn Bathgate is a business reporter for ASSET and Good Returns, email story ideas to benn@goodreturns.co.nz
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Comments from our readers
On 21 April 2011 at 7:33 am Dave said:
This is a dilemma for some. People need professionals to assist them in understanding their specific needs, and professionals need to earn a salary. If you are earning your salary through commissions, then why is there shame in this? If those commissions are out of alignment with the work undertaken, then fair enough, but in my experience it takes a lot of work to compile a full insurance needs analysis on an individual, and especially an entity. In the UK around 10/11 years ago similar online insurance companies came on the scene, and people still went to their brokers. There is a place for both, as they suit different customer types. The online companies also slated the broker model, which has the opposite effect of the desired effect. People stop trusting any insurance sales channel. One is not better than another... they are just different.. On 21 April 2011 at 8:44 am Ron Flood said:
Mr Morgan needs to be aware that under the FAA 2008 Section 35
' Advertisement by financial adviser must not be misleading, deceptive, or confusing
(1) A financial adviser must not advertise a financial adviser service in a way that is misleading, deceptive, or confusing."
To state that "significant" savings can be made by "slashing" commission rates by 50% is both deceptive and misleading.
We all know that to reduce commission rates by 50% almost all insurers only give a 10% discount in premium. This does not constitute "significant" savings. In fact it does not even compete with Pinnacle Life.
For an adviser to recommend a client have no advice for a 10% saving tells me more about the adviser than the client. Research in Australia released recently showed that clients who received advice before buying life insurance had significantly more cover than those who didn't.
Mr Morgan, in recommending clients have no advice may in fact be adding to the underinsurance problem, not solving it.
On 21 April 2011 at 9:22 am Majella said:
"Savings" on insurance premiums? This broker group is discounting the COMMISSION by 50%, and in doing so, may be saving the consumer 10%. Sure, that will add up to a lot of premium over time, but for this half-commission "Insurance4me" is doing very little of any real value. If Des Morgan is such a philanthropist, why does he sell these products at ZERO commission and charge a flat, direct fee? Probably because he would likely struggle to generate sufficient revenue to cover his overheads, let alone make a buck. On 21 April 2011 at 9:46 am Kavi said:
haha oh wow....... self needs analysis.....
Stop being such a wuss and disclose commission to your clients, have you even bothered to ask your client base how they feel about commission? Of all the brokers I have spoken with and clients that are friends/family who have got insurance via IFA's all say they could not give two hoots how much commission the broker gets paid....... THE ADVICE IS FREE they only pay the premiums and the company gives the adviser the commission.
Sure the % taken effects the premium, however if your insurance premiums are very high, you can either afford it, or your lifestyle/needs/risks are big enough for you to warrant getting such large amounts of cover/products.
Rather then you mum & dad Life/Trauma/Medical policies which are a $100 or so a month......
Get real people, you can no longer sit behind the "this is too hard" wall when so many of NZ's top brokers are getting on with, already are AFA's, have been given the green light for following companies process and are out there doing it!
On 21 April 2011 at 10:01 am tony Vidler said:
Well said Ron Flood. I endorse your comments. On 21 April 2011 at 11:48 am Neil Smith said:
I've been disclosing my commission for years. It's not such a big deal.
It also reads (to me) like Des hasn't been too involved in doing 3 million, or 4 million dollar cases, because they most certainly take 6 times more work, unless it is a case of one single loan, which may be 2 times as much work.
Either way, it requires a lot of financial underwriting, which is a whole other job!
The offering that Des has is very good, but I don't think any one with a substantial sum to insure is likely to get it through underwriting without a lot of help from an experienced adviser.
On 21 April 2011 at 12:11 pm Andy Phillipson said:
Des - I think you are doing the public and the industry as a whole a great disservice. You are repeating the same mistakes that the investment market did; you are allowing unqualified mums and dads to do full needs analysis' and buy accordingly, WITHOUT qualified advice. I believe that of all the investments that went sour for mums and dads over recent years, 70% were done without the guidance from advisors!
Where is this heading? Simple. When it all turns to custard and the public start bleeting on about bad insurance companies and policies, the GOOD advisers will be blamed, and another round of draconian legislation will cause more pain and anguish to us.
Rather than waiver responsibility and leave it up to the clients, why don't we embrace the education we have and use it to our clients' advantage. And if we earn good money for it, what a bonus. I challenge you to try getting good advice from a lawyer or accountant for nothing!
If you feel guilty earning a commission - change your charging structure or get out of the industry.
I think the biggest paradigm shift now is that we have to work for our commission. This is good for us, good for the industry, and best of all - good for our clients.
On 21 April 2011 at 12:22 pm Kevin said:
Been done before - won't work. Stop being lazy and get out there and sell... On 28 April 2011 at 10:34 am Johnny Adviser said:
Well it actually does work, but this guys site is terriblly designed, so yes, in his case, I doubt it'll work. All you old farts don't seem to realise GenY doesn't buy stuff like a Baby Boomer does, they use the net to research everything. Why wouldn't you. On 28 April 2011 at 12:27 pm Regan said:
Johnny, can you show me that numbers of Gen Y and for that matter Gen X buy life cover at all? That they even search Life Insurance online? I don't believe they do, and that's why online life selling doesn't work properly without a major point if difference. But even with one, its not as sexy as clothing, cars, or pizza. Its not as fun as any hobby, and not as emotional as any good cause so people don't BUY life cover. They don't seek it, and they don't really understand it.
Morgan doesn't seem to have a handle on the main points of difference that any online presence needs to have - even Pinnacle do that better - by playing out a marketing story about big bad insurance companies, greedy advisers, I am clever enough to do it myself etc, which some people are inclined to believe. This is clear from his stupid comment about insurance costs being the second biggest drain on income. I thought food and energy would be up there somewhere....
By taking a 50% commission and passing on a small discount but doing no work at all he just looks like the greedy insurance seller the client who looks online is trying to avoid.
On 28 April 2011 at 2:37 pm Kevin said:
Regan is on to it. I'm not an old fart (I'm 37) I just believe that life insurance will never successfully be sold over the net. It's all about face to face trust building and good old fashioned advice and service Jonny. Those people who buy over the net never get good advice so end up with crap product. On 28 April 2011 at 3:19 pm Johnny Adviser said:
I've seen stats that show many 1000's of searches are done each month in NZ for terms like "life insurance" and "buy health insurance". What you are failing to understand is, if you don't know where to go to get something, and you're under 40, you google it. You may not do the whole thing on line, but you do find out where you go next. If you can't be found online, you don't exist in the mind of a Y'er. On 28 April 2011 at 9:23 pm Kevin said:
Yeah there may be thousands of searches each month but what percentage actual go ahead and purchase online? I along with plenty of others i'm sure have given the likes of google adwords thousands of dollars for very little return. The more brokers who think online is the way to go the better for me I say... On 29 April 2011 at 10:35 am Johnny Adviser said:
If you're only doing paid search then you doing it wrong. The tone of several of these comments seems to be suggest a lack of understanding of how online can help offline. The web is your friend in this business not your enemy. On 29 April 2011 at 2:55 pm Ji Dowsett said:
What a plonker. The old 'flog the product with no advice' story.
Pull your head in Morgan and join the real world,. Real advisors get paid relative to the value they bring to the relationship, including a proper needs analysis. We don't flog product through websites anonymously with out giving profesional advice. Good luck as you go broke!
On 29 April 2011 at 11:47 pm KMB said:
Johnny Adviser is right, using the web is an extremely powerful tool that the industry as a whole is significantly behind the pace in utilising.
That being said, it's most useful as a tool to drive home the need for advice and as an aid for a more robust process, not as a complete replacement for the advice process.
On 30 April 2011 at 9:39 am Brian Klee said:
From the insightful remarks above, clearly this idea typifies what this is, "product selling", one aspect that has very damaging to Insurance Advisers reputations.
Can we then presume that because they are discounting their commission that there will be no service from them at claim time, or will they charge for this? Making sure your clients get paid at claim time is a basic responsibility that all professional Insurance Advisers must subscribe to. This soaks up hours and hours of time and we deserve to get paid for this, which forms part of our commission built into product.
Regretfully, this practice exemplifies product flogging in my opinion.
On 2 May 2011 at 9:50 am Tom said:
The problem with online product is going to be felt at claim time. Will the self selected cover be the right amount at the right time to the right place? Was full disclosure made in the application? Probably not.
In the few cases I have looked at, the saving with the likes of Pinnacle is insignificant and for older lives they have even been more expensive than a full commission product.
There is room for online sales, but the wise will always seek advice.
On 2 May 2011 at 12:13 pm anon2 said:
As the great Naomi B says
10% of advisers are really good at what they do
50% think they know what they are doing
40% do a horrible job
---which one is Des?
Probably the last one - however he seems to realise this and thus lets the public choose for themselves
On 6 May 2011 at 4:52 pm dean adviser said:
Have you as an adviser ever tried to send out a proposal and have the client send it back to you without getting bogged down wondering what the insurance company wants to know this or that for ? I can see Insurance companies underwriting much harder cos a client has filled out a proposal without advice, ...and who is going to win an argument at claim time when the client bleats "I didnt know that was what you meant". This is where the adviser plays a valuable part and earns his commission. Des stop trying to cheapen everything, sell quality!!! Commenting is closed
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