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presentation experiences from The Netherlands with compensation of financial intermediaries and commission ban. For seminar at University of Cologne 14th november 2014.TRANSCRIPT
Compensation of Insurance Intermediaries in The Netherlands dr. Fred de Jong
Cologne, 14th November 2014
Content 1. Market Structure 2. Legislation on Compensation Schemes 3. New Business Models of Insurance
Intermediation 4. Evaluation of the effects of the Commission
Ban
MARKET STRUCTURE
Insurers Reinsurers
Cliënts
Independent brokers
Serviceproviders
11 221
7.775
Marktpartijen in distributieketen verzekeringen en hypotheken (2014) R
egisters R
epresentators
21
6 Captives
Bronnen: DNB, CBS, AFM , VNAB
Authorised Agents
16,8 mln. Consumers, 7,6 mln. Housholds 800.000 SEWP 864.000 companies
Banks 72
Market Brokers
314 49
Market Failure
Quality of advice too low Financial advice has high impact on welfare and
well-being of clients Competence level and skills not adequate
enough Product driven instead of client based advice Perverse incentives (commission) Product bias – Supplier bias – Amount bias
QUALITY OF ADVICE INCENTIVES Market failure in all channels
When commissions are lower or completely forbidden, the medium quality of advice will rise
Independent advice: more work and a bigger chance of a best match between supply and demand
Legislation
License system (2006) Commission ban on complex products (2013) Inducement on fees (2013) State exams for professional qualification and PE
(2014)
COMMISSION BAN
Complex products
Investment products
Mortgages
Insurance against inability to work
Income Insurance
Payment Protection Insurance
Funeral Insurance
Life Insurance 8 [email protected]
EXPERIENCES COMMISSION BAN
Goal: improve quality of advice and reduce negative incentives
Positive Bigger variety and more choice for customers
Prices are lower (advice is cheaper)
Prices and services are more transparent Negative
Willingness to pay is low
Commissions allowed for non-life do not create real
independency 11 [email protected]
NEW BUSINESS MODELS
Hourly rate Fixed price Service subscriptions Hybrid models
But commission still dominant
(AFM, SER) 13
CAUSE • License system • New legislation (more costs) • Economic Crisis (less income) • Severe competition (internet)
CONCLUSION
Effects of commission ban are more positive than negative so far
Timing is difficult ‘Threat’ of a total commission ban Be aware: The medicine has to fit the disease!