Our agency recently won two contests, separately held by two large insurance companies. Both awards, based on productivity levels, included lavish holidays or conference trips worth thousands of dollars. Unfortunately, because of time constraints, we were unable to take advantage of either.
One of the insurance companies, understanding the reason we couldn’t attend, uncharacteristically doled out a cash equivalent. The other didn’t.
Although we’re frequently awarded such trips, we tend to decline them. We have in the past, however, been on some rather high-end trips to Italy, Ireland, Portugal and China, as acknowledgment of our production with an insurance company.
Although free, these trips generate a taxable benefit, which can run into thousands of dollars. Now, this begs the question, does the prospect of my wife and me being flown business-class to an exotic destination, and wined and dined like royalty for a few days, make me have second thoughts when determining which life insurance application to pull out of the drawer? Not really, but then I may be an anomaly.
All in all, we’ve turned down many more trips than we’ve accepted. By doing so, we’ve probably saved insurance companies hundreds of thousands of dollars. We’ve also never really worked specifically toward qualifying for one of these perks. The reasons for this are mostly personal—we like to plan our own destinations, and on our own time.
The question then is: Should the industry still be offering these incentives? Secondly, do these favours negatively affect the professionalism of our industry and cheapen our product?
My personal view is they don’t. But I’m not opposed to doing away with these trips. The reason has mostly to do with perception. From a client’s point of view, the knowledge that sending significant amounts of business to one company over another might win me a vacation in a five-star hotel in Venice or Rome could raise concerns over the objectivity of my recommendations. Besides, given that our commissions and override schedules increase based on volume, an agent might be inclined to promote one company over another because of higher override percentages. Though, I think the imputation of commission mongering would cause bigger concern among clients than the offer of a free trip.
The mutual funds industry has decided to eliminate such incentives. However, while those salespeople can negotiate fees with their clients in general, insurance product commissions are fixed and embedded in the product design. This flexibility, or lack thereof, is also a factor to be considered in the equation.
All said and done, there are certain advantages to these high-level trips provided by insurance companies. Usually, they’re attended by senior people from the insurance company. And I’ve found that a lot can be accomplished by being able to sit down and have a face-to-face meeting with the senior underwriter, actuary or tax advisor. Of course, one could argue the meetings can be organized in downtown Toronto; but it’s sort of nice having the discussions over Hawaiian punch on a beach in Hawaii.
Also, these trips provide the opportunity for major producers in the insurance industry to sit down in a relaxed atmosphere and share ideas and issues. I’ve made some very good friends in the industry as a result of these opportunities.
So what’s the verdict? Are these incentives good or bad? I’m still sitting on the fence. The kind reader who asked me to address this issue felt that the industry should take the high road and cease offering such incentives. She felt it leads to bias. I’d like to know how you feel about the issue. Drop me an e-mail and I’ll report back in a later edition. In the meantime, don’t pack your bags… just yet.
Originally published in Advisor's Edge
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