Sales Commission Versus Product Performance in Financial Services
Life Insurance as Case Study
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This book reports a study of universal life insurance as a case study for analyzing the tradeoff of selling commission against product performance, using policies that have the feature of varying sales commission by using a noncommissionable term rider in the policy. This study first looks at whether the use of the term rider has a statistically significant effect on the policy''s performance over the long term. The study reveals no statistcal significance, when measured against other independent variables. The study then performs a discounted cash flow analysis of four different case profiles...
This book reports a study of universal life
insurance as a case study for analyzing the tradeoff
of selling commission against product performance,
using policies that have the feature of varying
sales commission by using a noncommissionable term
rider in the policy. This study first looks at
whether the use of the term rider has a
statistically significant effect on the policy''s
performance over the long term. The study reveals
no statistcal significance, when measured against
other independent variables. The study then
performs a discounted cash flow analysis of four
different case profiles to determine what
improvements in performance a policyholder could
expect given various degrees of commission
reduction. The results indicate that there is a
tradeoff, but predictability is problemmatic. The
study is a cautionary tale to agents and clients who
assume any predictable result from commission
reductions in these products, and leaves the reader
with the question: Who then is getting the better
part of the negotiation over commissions in these
products? The agent, the client, or the insurance
carrier itself?
insurance as a case study for analyzing the tradeoff
of selling commission against product performance,
using policies that have the feature of varying
sales commission by using a noncommissionable term
rider in the policy. This study first looks at
whether the use of the term rider has a
statistically significant effect on the policy''s
performance over the long term. The study reveals
no statistcal significance, when measured against
other independent variables. The study then
performs a discounted cash flow analysis of four
different case profiles to determine what
improvements in performance a policyholder could
expect given various degrees of commission
reduction. The results indicate that there is a
tradeoff, but predictability is problemmatic. The
study is a cautionary tale to agents and clients who
assume any predictable result from commission
reductions in these products, and leaves the reader
with the question: Who then is getting the better
part of the negotiation over commissions in these
products? The agent, the client, or the insurance
carrier itself?
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