Debate on commissions is overdue in group benefits

by Michael Kettner, Kettner Benefits

The Canadian Life and Health Insurance Association (CLHIA) is planning to implement its new Guideline G19, Compensation Disclosure in Group Benefits and Group Retirement Services for new contracts in January 2019.

In my eight years of managing group benefit plans, it’s extremely rare to be asked about the amount of commission my firm makes. It’s only happened six times. However, it is an interesting issue raised by the CLHIA -- and just because it hasn’t been asked more, it doesn’t mean it isn’t a question that is on the minds of prospects and clients -- and something that group benefit advisors should address pre-emptively.

So a growing trend for group benefits advisors is the act of providing transparency to the client. As it relates to cost, they will typically do this at renewal time by breaking down the costs of the insurer and the justification on why rates are increasing or decreasing. And, as part of the process, sophisticated advisors will often share the commission they receive to service the account.

Most business owners understand that service providers need to make a profit. In fact, most of them would hope that their service providers are making a profit in order for them to continue to provide the services which they depend on for their own operations.

Yet as health care costs continue to rise -- which directly leads to higher premiums -- employers will continue to demand further transparency on the costs that are embedded into their plans, including commission. As purchasers, they are entitled to ask the questions that they’d like to have answered as part of the purchasing process.

The market is more than capable of handling this issue by itself.

Based on this, why would CLHIA need to demand insurers to disclose commission to all of their plan sponsors? It isn’t demanded by regulators, federal or provincial legislative bodies, the media, or consumers. There hasn’t been a scandal or outcry from business owners.

G19 raises an important issue around transparency, yet entirely misses the point by forcing an exact number in regards to earned commissions to be front and center, which only distracts from the more important value proposition of what was actually delivered.

G19 will only commoditize an industry that was always meant to be built on delivering great service, rather than delivering the bare minimum in order to keep commissions low.