Published in FT Adviser 10th November 2011
Some general insurance providers are pressing advisers to give them more business or risk losing renewal income or trail commission, an adviser has claimed
Bob Cook, principal IFA for Essex-based Platinum Financial Consulting, said although insurers were technically within their contractual rights to push for more business, it “does not make it right” because the consumer ends up paying the price.
He claimed: “We have the situation of insurance product providers pressuring professional introducers to give them business or lose considerable renewal income.
“In the past month both Paymentshield and Select & Protect have threatened to reduce our trail incomes significantly or even stop them altogether. While their terms of business agreements might allow them to do this, in a regulated world this does not make it right.”
Mr Cook claimed that Paymentshield told him that if he did not give the company new business, it would cut his commission to 5 per cent.
He also claimed Select & Protect had threatened to stop paying altogether.
Mr Cook added: “If a provider’s product stops selling then the onus is on the provider to redesign the product to make it more attractive to our clients.
“It is completely unacceptable to bully previously loyal introducers because they are now offering their customers what they believe is a better product.”
Mr Cook said the outcome would mean the customer loses because the IFA might feel forced to sell a slightly less suitable policy, rather than risk losing renewal income built up over the years. He added: “This is a clear breach of treating customers fairly. The contract term is hidden from the customer and the FSA sees no reason to investigate. The outcome of such a condition is the market becomes unfairly skewed and best advice takes second place.”
A spokesman for Paymentshield said: “In line with the dormancy clause in our terms and conditions, we can confirm a number of brokers no longer active with Paymentshield have been notified of a change to their commission. However should these intermediaries demonstrate a return to active submissions then their commission will return to its previous rate.”
A spokesman for Select & Protect said: “Select & Protect is committed to delivering on our treating customers fairly obligations. The terms of business between Select & Protect and its intermediary partners does allow us to reduce or cease paying commission to those with who we do not have an active and ongoing relationship. We exhaust every avenue before taking the decision to reduce or cease paying commission.”
The FSA declined to comment.