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Much of the issue is advanced commission. It's one of the major reasons that CMS stepped in to micromanage the MA market.
Rick
Rick
Brokers Working in Their Own Best Interest
- Thread starter NinjaNic
- Start date
If he were a captive agent with no product offering other than than a high priced one, would he also be "unethical" if he wrote his product knowing lower premiums were available?
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I would say unethical only if he makes recommendations based in him earning advanced commissions. Most captive companies allow you to write thru other companies, but they don't sign off in advancing commissions. That's how it was when I was with Axa and MetLife securities
If you are with AGLA (for example) you are not allowed to have a license to represent another company. So it would be either write it, doing the best you can or pass it by. Most people are with companies such as AGLA not so much for products offered but for the base salary, retirement, benefits, etc. which amounts to saying they are writing what will serve them best as far as compensation. I went back with them because I needed health insurance and couldn't buy it due to heath. I sold their product. We were competitive but were almost never the cheapest but I don't think I was being unethical when I sold their product. I was an agent of the company and as such I was to offer the companies products in an honest and forthcoming manner. I tried to make sure I left the family in better shape when I left than when I walked in.
But even as an independent, I will not always have the cheapest product to offer because I am not contracted with every possible company.
I have a real problem with the agent saying that what he is proposing to sell is the best available but I really have no problem with him considering commission when he chooses what companies to represent. Most agents do that. There are very good FE agents that would not choose to write for a company that only paid 50% first year with no advance even if it had the lowest premium. While the product should be good for the client it also has to be good for the sales agent or the agent won't be around to provide service when needed. JMHO YMMV
- 11,996
Why not? This is in theory a free market and provided folks are complying with appropriate laws and not lying to the client about the product, why not sell a more expensive product? Presuming the only difference between the products was compensation, we can all probably agree that it's best for the agent to provide the less expensive premiums (all other things being equal including underwriting, guaranteed and predicted rate of return, etc), but if an agent wants to sell a more expensive product, why are they a "scumbag" and "unethical"?
In this situation the client will be paying more for the product, but as long as the agent isn't lying about what the premiums are (like projecting higher interest rates on a UL then are guaranteed and/or reasonable), if the client agrees to the price and wants to do it, where is the breach of ethics? It has been almost 10 years since I took my licensing exams and I'll admit I didn't pay much attention to the CE requirements each time I've had to complete them, but was there a part I missed about having to give my clients the least expensive product available? Was there a part I missed where they talked about how I should never make a decision about what options to present to a client based on my compensation? Don't most agents look at the comp on a new product and decide what carriers they're even going to represent partially based on the commission levels? Especially in the FE world we have agents coming on here all the time wanting "top contracts", how is that much different?
Again, isn't this a free market decision?
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You don't have a problem with professionals making a recommendation because he wants an advanced commission? what if you were this client: Mr. Client, I have 2 other A+ rated carriers, who could offer you the exact product you are looking for to protect your family, but I'm recommending another company, that's $2,000 to $4,000 more per year, on the basis it pays me an advanced commission...No other reason than that...I want to cost you valuable money that could be going to your other financial goals because I want my commissions advanced....
- 11,996
It's this simple to me:
Client wants X amount of insurance. Agent says "Great, I can get you X amount of insurance for Z amount of premium."
Client says "Great, I'll take it."
Especially in this day and age, if the client wants to shop it they can. They can go to term4sale.com and compare different term products. If they want to call up another agent and shop it, they can. If the client thinks that's too much money and they don't want it, they can. If the client isn't being lied to about the premium (or told that this is the least expensive product available), I don't see the problem. Again, is it what I would do? Absolutely not. Do I think it's good business? No. Do I think the agent is a scumbag, unethical, or dishonest for selling a more expensive product if that decision was based solely on price? No, not at all.
If I was the consumer, I should either be aware of my options or simply accept that I got what I wanted at a price I could afford from a company that's financially stable.
Let's be honest Matt, very rarely are insurance agents selling clients the least expensive product available. Cincinnati Life has some great prices on term, but almost no one sells them, not to mention the captive shops. State Farm, Allstate, Progressive, and just about every car insurance company is always selling people a more expensive product than the least expensive carrier out there. Sometimes each company respectively provides the best price, but that's probably not the case at least half the time.
- 10,363
But he did plan to lie about the product. He said he would "tell the prospect it was the best available rate".
Let me summarize the ethics of this:
He planned to lie to a prospect about more affordable options, so that he could reap a higher commission and get paid in a shorter amount of time.
Those were allegedly his exact words.
If that isnt unethical I dont know what is!!
Is it illegal? That is a grey area that will vary state by state.
But I would consider lying to a prospect a purposeful "Omission" of facts. (proving the intent to omit would be the hard part... other than the IMOs testimony..)
If this ever got in front of a jury they would string this guy up by his toes in a heartbeat!
He certainly could be fined or have his license suspended by the state DOI if it could be proven that he purposely omitted facts and misled the client, just for the sake of his own benefit.
I hardly ever recommend the absolute cheapest policy out there. But I always recommend a policy that is competitive both on price and features. His concern was for his own well being, not the clients.
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So your saying you cant let go of an agent who is a subagent of a GA? Why not?
If you could include it in your contracting I would. And I would think that you have every lawful right to terminate your association with an unethical producer. But I am no expert on IMO stuff.
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The main problem in the OP is the statement:
"Agent: That is fine, I will tell him it is the best available."
That is an out and out lie and the agent knows it.
As for taking compensation into account, I doubt there are many agents that have been in business for any length of time that haven't, at one time or another, considered compensation either when choosing a product to present or which companies to contract with.
When I was with AGLA I often told people, "You can find a cheaper premium somewhere else and if you can't find it today you will be able to find it tomorrow because it is a competitive business and companies are constantly changing. But this is a good plan with excellent benefits and I can do something no one else can do for you. I can provide this for now and they can't because I am here and they are not."
Don't think that ever cost me a sale but it seemed to help in more than a few presentations.
Most of the time it is not necessary for an agent to mention the competition but if they do they should be honest about it.
"Agent: That is fine, I will tell him it is the best available."
That is an out and out lie and the agent knows it.
As for taking compensation into account, I doubt there are many agents that have been in business for any length of time that haven't, at one time or another, considered compensation either when choosing a product to present or which companies to contract with.
When I was with AGLA I often told people, "You can find a cheaper premium somewhere else and if you can't find it today you will be able to find it tomorrow because it is a competitive business and companies are constantly changing. But this is a good plan with excellent benefits and I can do something no one else can do for you. I can provide this for now and they can't because I am here and they are not."
Don't think that ever cost me a sale but it seemed to help in more than a few presentations.
Most of the time it is not necessary for an agent to mention the competition but if they do they should be honest about it.
- 10,363
This can be an issue often times. But for this case it shouldnt be.
The competitive quote was around $8k I think... even on monthly thats over $600/month you just made...
To be that adamant about an advance for a case that large is just being an absolute greedy bastard!
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