Brokers group hits out at insurers over compensation guideline

by David Keelaghan13 Feb 2018

Proposed guidelines on compensation disclosure in group benefits has received short shrift from a national brokers group. Members of the Canadian Group Insurance Brokers (CGIB) claim the Canadian Life and Health Insurance Association’s (CLHIA) consultation process has neglected their views. Earlier this month, CLHIA head Stephen Frank announced that Guideline G19 – Compensation Disclosure in Group Benefits and Group Retirement Services – would be held back until January 1, 2019. This, he explained, would provide insurers more time to properly engage with advisors and brokers. According to CGIB head Dave Patriarche, however, this isn’t the case, and brokers have been largely left out of any real decision making.

“I think it creates an adversarial relationship with the insurance companies,” he said. “They are going right past us and direct to our clients. Whenever you have someone going past you, especially on something like compensation disclosure, everyone will get their backs up. I think the effect will be a lot of people getting out of the business. I can see us losing 15–20% of brokers in Canada.”

In announcing G19, the CLHIA stated that it wanted to see insurers disclose all broker/advisor compensation to group contract sponsors. In Patriarche’s opinion, it’s a solution to a problem that doesn’t really exist.

“A broker is free to charge whatever they want, and sometimes the highest commission means a lot of value add, and other times it is just someone charging the highest price they can,” he says. “I think this (G19) will drive things to the lowest price, but you have to consider what the client is giving up. In the UK and Australia when they have moved over to full fee-for-service, people didn’t want to pay for advice, and everyone suffers.”

Financial advisors in Canada are already well versed in this sort of regulation after the introduction of CRM2 in 2016. That rule set out reporting standards on fees and commissions for investment products, but its Patriarche’s belief that group benefits are not really comparable.

“CRM2, to my understanding, is to protect the consumer,” he said. “But this isn’t a consumer purchase, it’s a business-to-business deal. I’m trying to understand why insurance companies feel it is so important that group benefits need to be disclosed, but individual life insurance doesn’t -- that should have been years ahead of this.”

Related stories:
Group benefits compensation rules held back until 2019
Cut-off age for long-term disability benefits should remain the same, says industry expert


  • by B 2018-02-14 11:02:18 AM

    The wrong question is being asked here. It isn't why shouldn't individual insurance also have to disclose. The real questions is, if disclosure of income/commission/profit is required should that not be applied equally to ALL businesses? When a client signs up for a group plan they have had and continue to have the opportunity to "shop around". They can go to many brokers and see what services they provide along with providing the group insurance and at what cost. The client has the ability to say Broker A costs me more $1,000/year but wow do they provide me with a high level of service compared to Broker B for the same group plan from company X, so I will go with Broker A. The same client could see no value in Broker A and save $1,000 with Broker B. OR the client could say this group plan is to expensive and not move forward with it. There is no need for the client to know how much the profit Broker A or B is making.
    Back to my point. As with all industries the client has the ability to shop around. So if this industry is required to disclose shouldn't all industries. Shouldn't I then walk into a store and see that Brand A TV Cost $150 to manufacture but is selling for $2,000 vs Brand B Cost $1,500 to manufacture but is selling for the same $2,000. OR Brand A yoga pants made over seas cost $5 to manufacture, Brand B made locally cost $80 to manufacture both selling for $120. I would be inclined to pick brand B in both scenarios. My point is you can not unfairly target one industry over others, if these types of regulations are to be implemented they should and need to be at a government level and applied equally to ALL. It should also be noted that this is yet another hit to small business in Canada who provide local employment.