The Canadian Life and Health Insurance Association (CLHI) is implementing a new Compensation Disclosure Guideline G19 on the following dates:
Effective January 1, 2019 for group retirement services (new contracts).
Effective January 1, 2020 for group benefits
Guideline G19 requires advisors to deliver and disclose their compensation to the client. The CLHIA will create reasonable and appropriate protocols for tracking and disclosing compensation to plan sponsors.
In the group benefit industry, transparency and commission disclosure is not considered the norm. Commission rates vary from advisor to advisor and the onus is often put on plan sponsors to ask the question on how much they are paying their advisor / broker. At Benefit Consultants Inc. (BCI) we are proud to have been a full disclosure firm for over 40 years. In the past, we have disclosed our compensation for all new contracts at plan inception, at all benefit marketings thereafter, and anytime upon request. For self-insured (ASO) and refund accounting policies, we have disclosed our compensation annually at renewal. We are pleased to advise as June 1, 2018 we disclose our compensation annually at renewal for all policies including our standard commission schedule and fee for service schedule (if preferred).
Commission is our preferred method of remuneration as it allows us to provide a comprehensive level of service which is flexible to our client’s needs. We review this regularly as size/volume influence this; when a group grows we routinely (voluntarily) adjust our compensation percentile down. A commission based model is shared between the employer and employee and does not attract GST. Alternately, BCI can be compensated on a fee for service basis. This is more appropriate for larger accounts and is borne as an expense to the employer and attracts GST. We will work with either model and are glad to review as the account dictates.
In addition to commission disclosure we also disclose the insurer’s total retentions charged on the benefit program for the health, dental, and short-term disability benefits. The premium rates established by the insurer are estimated to cover the expected claims and the various expenses incurred in administering the program. These expenses include the claim adjudication and payment services, insurer's risk margins for providing the insurance protection, as well as a margin for insurer profit and advisor commissions payable. The percentage of the premium to cover the claims is known as the "target loss ratio", while the percentage to cover expenses associated with administering the program is the "retention".
Below is an example of an insurer’s figures. Advisor commission is built into the insurer’s retentions:
We take pride in the detailed reports and information we provide to our clients. Any information not provided is always available upon request. For more information regarding advisor disclosure, transparency, and how it impacts your benefit or group retirement plan contact Benefit Consultants Inc. at email@example.com or call 1.800.667.2973.