Things Your Insurance Broker Might Be Hiding From You

February 7, 2018 at 3:42 PM Leave a comment

There is a secret world going on behind the walls of your insurance broker’s office. They are getting the perks and benefits of that world, but who is losing? Likely the people buying insurance from them. Typically, brokers aren’t choosing their insurance company based on the best price or even the best service. They are making their choice based on the many luxurious paybacks they may be getting. The dirtiest secret in the life insurance business is that it isn’t about who is providing the best client service – it is about who is holding the best conference getaways, incentives, and best entertaining the brokers to get them on board.

At a time when low-interest rates have squeezed almost every last dime out of the insurance industry, life insurance executives know that to make money they must delve it out in the right places. If they can’t keep executives happy, there is really very little loyalty. This means brokers have no problem hopping ship to the competition.

It isn’t just about keeping the executives happy, either – “seminars” and trade shows are all about making both marital partners happy. That is almost doubling the costs, and guess who is picking up the tab? Not the brokers – they are cashing in and going on trips around the world on their client’s dime.

According to investigative results leaked by the Globe and Mail, Canada’s insurance company industry has very little transparency about their pricing, products, or their competition within the industry. Even though there has been a massive push to stop the extracurricular perks that come at the expense of unwitting insurance buyers, little has changed; things are still rolling along much as they did in the past. The average consumer has little to no knowledge about how their money is being spent or how they are losing out while their brokers are living high on the hog and making critical choices about the consumer’s future.

Life insurance brokers have begun handing their clients affidavits that insist they are recommending the best insurance policy in the industry to suit the client’s needs. In reality, though, there is no one keeping tabs to make sure that the forms are real or are anything but a formality to give clients a false sense of protection against fraud. The papers being given usually do not reflect what is really going on in the industry, and is no guarantee that the insurance industry makes any real promise to find the best product for their customer’s wants or needs.

What the Globe and Mail found was that most brokers are not scouring the many options and investigating products, negotiating prices or trying to find the most competitive for those they represent. Most of them are checking out the companies to find out who will give them an all-expenses-paid trip to Asia or send them to a conference in an exotic locale in order to gain their business. What they also found is that smaller, less expensive insurers aren’t able to hold their own because they can’t offer those perks while trying to keep costs low. That type of practice is making those who try to play fair all but extinct in the life Winnipeg insurance industry.

Insurers who are trying to extinguish the practice are finding that going on the straight and narrow is being met with fewer brokers and bankrolls. Unless everyone is on board, then there is no way for the insurers to create change. All that those trying to do the right thing are going to do is to take themselves out of the market.

Up to 70% of the billions of dollars’ worth of life insurance policies are sold through independent insurance brokers, so this trend is not likely to change anytime soon. It Is hard to stop a tidal wave. But if clients catch on to this hidden secret, they might start to voice the demand for more transparency and change in the industry. After all, no consumer wants to foot the bill for their broker’s trips when the average agent is already raking in as much as $100,000 a year. If just one major insurer sticks with the practice, then the market won’t change. Ending the practice will be difficult – if not impossible.

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