My Friend and Mentor, Peter Comrie from Full Spectrum Leadership asked me if I would put together a Blog on understanding the Ethics of your Broker. He said, don’t hold back. This post couldn’t of been requested at a better time.
I would like to start by saying that if you, the Client are aware that the Broker is doing one of the following things, it isn’t Unethical. It only becomes questionable when you believe one thing and another thing is happening.
Do you realize that part of the premium you pay to the Insurance Company goes to your Broker and he receives a commission? My question is, what is he/she doing for the commission? Would you pay for an employee who never shows up for work?
At Glendinning Insurance Services, we are your first point of contact. Why??? When you call us and ask a simple question such as, How many hours a week does an employee have to work to be on the plan??? My mind instantly goes to why would you be asking that question? Almost every time that question is asked there is a story behind it and we are able to help our clients. As Peter says, There is the thing, but what is the thing behind the thing?
Am I frustrated seeing people pay other Brokers a commission and they don’t ever hear from their Broker? Yes I am.
The other area that you can ask your Broker, is how much are you getting paid? Glendinning Insurance Services takes a standard commission. There is a scale that Insurance Companies put in place and the larger your company the less of your premium goes to the Broker. So with a large company, I might end up receiving on average 2 to 4% commission.
When I go into a new company, I can usually tell how much commission a Broker is taking by looking at the Target Loss Ratio. You don’t know what a Target Loss Ratio is? My clients understand that this is the Administration Cost. I believe Educating my clients is important and allows them to make informed decisions.
There are Brokers who take a flat 10%, no matter the size of the group. I can see if a Broker is doing extra work, this might make sense. It is definitely something I would want to have a conversation with my Broker on.
The other trick that is going around is telling the clients that they aren’t charging a commission on the Administrative Services Only (ASO). Of course they don’t want a commission on the ASO. If at the end of the year, the client gets money back, the Broker has a charge back on their account. They have to give commission back to the Insurance Company, based on the premium refunded to the Client. Trust me I know, I have been hit this year with all the money being repaid to my clients because the Dental offices were closed.
The trick is that they take an inflated commission on the pooled benefits, Life, AD&D, Dependent Life, Long Term Disability and Critical Illness benefit. This way at the end of the year there isn’t a charge back if the client gets money back from excess premiums paid into the ASO benefits.
With all of this going on, is there no wonder that we have an Insurance Council who continues to implement stricter restrictions on the Brokers?
While I am on a rant… The most important thing, does your broker understand the contract wording that they sold you? This is a legally binding contract and if an employee becomes seriously ill, has a bad injury or passes away there are serious ramifications to the employee and beneficiary’s lifestyle.
Insurance isn’t about the sale it is about assisting a person at claim time.
My questions to you;
- What are you paying your Broker in Commissions?
- Is your Broker accessible?
- Do they understand the contract they sold you?
If you are looking for a Broker who not only shows up for work but on time, contact Glendinning insurance Services at 250-764-0142.
we are your Trusted Advocates