Advisor protests ‘direct-to-consumer’ competition

by Will Ashworth19 Aug 2015
A Toronto-area insurance advisor questions the sense in selling the products of the growing number of carriers now going the consumer-direct route with ‘overly simplified’ offerings 
Increasingly the big financial conglomerates are ramping up their marketing machines to drive up profits while simultaneously pushing down costs resulting in bigger and bigger profits.
Toronto insurance advisor Naoshad Pochkhanawala says he’s finding some of the products big financial firms are selling direct-to-consumer are often simplified and quite possibly inferior versions than those offered through independent advisors – often from the same provider.
“I take issue with all companies that are promoting 'simplified' products and making them available directly to consumers who don't know that there are better, more flexible, more effective cost alternatives available,” Pochkhanawala told WP. “When it comes to any complex product I don't think suppliers or wholesalers should compete with their retailers in any industry - it a poor business model that seldom leads to success and has negative effects upon those industries in general.”
Pochkhanawala believes financial advice provided by the insurance industry in this country is being degraded by the quest for profit. He recently posed a question on the online forum at For Advisors Only that caught LHP’s attention.
“If a company is going directly to the consumer (whether offering preferred rates or just the same product) should agents boycott selling their product?” Pochkhanawala asked.

The responses to his question all seem to agree that a boycott makes no sense. Rather, a strong advisor association is needed to promote all the good work advisors provide their clients. Whether it be Advocis or another organization, advisors need to do a better job protecting their own turf.
“I don't fault companies for attempting to circumvent agents to maximize profitability,” wrote Pochkhanawala. “I do blame advisors for letting it happen and not punishing them. Advocis, IFBC, someone take up the flag perhaps?”
Ultimately though, Pochkhanawala believes the best interests of clients can co-exist with those of advisors without sacrificing one’s ability to make a living.
“Unless there is an over-arching reason to recommend the product of a company that sells direct I feel that among the 70 or so licensed insurers in Canada, I should be able to serve my clients best interest without sacrificing my own,” writes Pochkhanawala.


  • by Peter 2015-08-19 1:48:22 PM

    These "over simplified" guaranteed issue products are good for people with serious health conditions who would be declined otherwise.

    But there are thousands of very healthy consumers who do not know any better and do not know that they could purchase a superior life insurance policy for far less premiums and receive the advice of a knowledgeable advisor to discuss the pros and cons of the maze of available policies.

    These guaranteed direct-to-consumer policies are a highly profitable revenue source for these companies, especially when sold to healthy consumers. And yes, they are circumventing the advisor with the objective to get rid of the independent distribution channel over the next decade.

    I for one try my very best not to do any business with any insurance company who sells these policies directly to the consumer.