Commission payment

DocHants

Can someone explain this please as I cant quite believe what Im reading!

Commission Payable
• For arranging this contract for Mr A & Mrs B on the basis outlined in the
accompanying Key Features document or Policy Summary, Legal & General will pay commission to the
individual or firm responsible for setting up your policy with us worth £812.68 immediately, and then from
month 49, £0.86 each month until the end of the Plan.

Quote was obtained from Compare the Market.. so I assume L&G will pay them the commission "immediately" upn the take up of this policy. What about if I decide to cancel after 6 months or change to a different provider??

I cant quite believe they would receive this much which is more than 12 months policy payments!

It does state "individual" or "firm", implying that as an individual, I should also be able to claim this commission???

What do these "firms" do differently that I couldn't do myself to justify this sort of commission?

Weighty1

They have regulatory authority to set up and administer insurance policies. Do you have the required regulatory permissions?

Imagine it this way, the commission payment is paid to the intermediary for them using L&G as the insurer. If L&G did not pay commission they would have to employ an in-house marketing team to drum up business as advisers wouldn't use them.

Weighty1

Oh, and to further answer the question, if you cancel the policy (normally within 4-years) then the broker used will receive a clawback of the commission payment by a pro-rata amount. And no, when it says "individual or firm" it is because the adviser may be a sole trader rather than a ltd company or partnership.

Also, whilst CTM may not be an old fashioned "advisory" type firm, they will have spent millions on developing their technology to help you receive these quotes and be able to arrange this business.

SonOf

Quote was obtained from Compare the Market.. so I assume L&G will pay them the commission "immediately" upn the take up of this policy. What about if I decide to cancel after 6 months or change to a different provider??

There is a clawback period.

I cant quite believe they would receive this much which is more than 12 months policy payments!

It isnt a 12 month plan.

It does state "individual" or "firm", implying that as an individual, I should also be able to claim this commission???

You can. You pay your thousands to the FCA in application (and more with FCA, FSCS, FOS and MAS in levies). You sit your exams to become qualified, set up your business and then set up an agency with the insurer. However, as it would be your own case, you would not take any commission.

What do these "firms" do differently that I couldn't do myself to justify this sort of commission?

They spend tens or hundreds of thousands of pounds a year to be able to sell these policies.

Cscott139

If you cancel the plan after 6 months L&G will take some of the commission back. It is an initial payment based on you keeping the plan in force for 4 years.

DocHants

I think what I was getting at was that I can go direct to L&G fill in a form, get a quote, and no one gets commission, or I can go to CTM, fill in the form and they get £800!

But I suppose I do get meerkat movies and 2for1 meals!!!

Cheers for the responses though!

SonOf

I think what I was getting at was that I can go direct to L&G fill in a form, get a quote, and no one gets commission, or I can go to CTM, fill in the form and they get £800!

If you want to pay more in premiums, then go to L&G.

Premium and commission are not directly linked in the way you appear to think.

Cscott139

CTM do link into an advice company if you choose to go down that route where you will get advice about the products tailored to your situation. They will also advise on trusts and check health etc before they apply to make sure there are no nasty surprises with the premium further down the line.

Weighty1

SonOf wrote: »

If you want to pay more in premiums, then go to L&G.

Premium and commission are not directly linked in the way you appear to think.

What makes you say you'll pay more in premiums with L&G? They are typically one of the cheapest providers for life cover and critical illness cover, even if it their upgraded critical illness option.

Also, premiums and commission are almost always linked. A bigger premium, providing the term of the plan isn't reduced under 11-years, will almost always result in bigger commission for the broker.

SonOf

What makes you say you'll pay more in premiums with L&G? They are typically one of the cheapest providers for life cover and critical illness cover, even if it their upgraded critical illness option.

Have you seen their direct sales force pricing? Its higher than IFA/Broker pricing. And will be higher than comparison site pricing.

Also, premiums and commission are almost always linked. A bigger premium, providing the term of the plan isn't reduced under 11-years, will almost always result in bigger commission for the broker.

There is a link but not a direct link. At least not on a like for like basis. For example Firm A could get more commission than Firm B but also have a lower premium.

Weighty1

SonOf wrote: »

Have you seen their direct sales force pricing? Its higher than IFA/Broker pricing. And will be higher than comparison site pricing.

Ah sorry, I thought you meant in comparison to other insurers, rather than broker premiums compared to direct premiums.

There is a link but not a direct link. At least not on a like for like basis. For example Firm A could get more commission than Firm B but also have a lower premium.

Can't fault that :beer: