We would love to hear from you. Click on the ‘Contact Us’ link to the right and choose your favorite way to reach-out!

wscdsdc

media/speaking contact

Jamie Johnson

business contact

Victoria Peterson

Contact Us

855.ask.wink

Close [x]
pattern

Industry News

Categories

  • Industry Articles (21,155)
  • Industry Conferences (2)
  • Industry Job Openings (35)
  • Moore on the Market (414)
  • Negative Media (144)
  • Positive Media (73)
  • Sheryl's Articles (800)
  • Wink's Articles (353)
  • Wink's Inside Story (274)
  • Wink's Press Releases (123)
  • Blog Archives

  • March 2024
  • February 2024
  • January 2024
  • December 2023
  • November 2023
  • October 2023
  • September 2023
  • August 2023
  • July 2023
  • June 2023
  • May 2023
  • April 2023
  • March 2023
  • February 2023
  • January 2023
  • December 2022
  • November 2022
  • October 2022
  • September 2022
  • August 2022
  • July 2022
  • June 2022
  • May 2022
  • April 2022
  • March 2022
  • February 2022
  • January 2022
  • December 2021
  • November 2021
  • October 2021
  • September 2021
  • August 2021
  • July 2021
  • June 2021
  • May 2021
  • April 2021
  • March 2021
  • February 2021
  • January 2021
  • December 2020
  • November 2020
  • October 2020
  • September 2020
  • August 2020
  • July 2020
  • June 2020
  • May 2020
  • April 2020
  • March 2020
  • February 2020
  • January 2020
  • December 2019
  • November 2019
  • October 2019
  • September 2019
  • August 2019
  • July 2019
  • June 2019
  • May 2019
  • April 2019
  • March 2019
  • February 2019
  • January 2019
  • December 2018
  • November 2018
  • October 2018
  • September 2018
  • August 2018
  • July 2018
  • June 2018
  • May 2018
  • April 2018
  • March 2018
  • February 2018
  • January 2018
  • December 2017
  • November 2017
  • October 2017
  • September 2017
  • August 2017
  • July 2017
  • June 2017
  • May 2017
  • April 2017
  • March 2017
  • February 2017
  • January 2017
  • December 2016
  • November 2016
  • October 2016
  • September 2016
  • August 2016
  • July 2016
  • June 2016
  • May 2016
  • April 2016
  • March 2016
  • February 2016
  • January 2016
  • December 2015
  • November 2015
  • October 2015
  • September 2015
  • August 2015
  • July 2015
  • June 2015
  • May 2015
  • April 2015
  • March 2015
  • February 2015
  • January 2015
  • December 2014
  • November 2014
  • October 2014
  • September 2014
  • August 2014
  • July 2014
  • June 2014
  • May 2014
  • April 2014
  • March 2014
  • February 2014
  • January 2014
  • December 2013
  • November 2013
  • October 2013
  • September 2013
  • August 2013
  • July 2013
  • June 2013
  • May 2013
  • April 2013
  • March 2013
  • February 2013
  • January 2013
  • December 2012
  • November 2012
  • October 2012
  • September 2012
  • August 2012
  • July 2012
  • June 2012
  • May 2012
  • April 2012
  • March 2012
  • February 2012
  • January 2012
  • December 2011
  • November 2011
  • October 2011
  • September 2011
  • August 2011
  • July 2011
  • June 2011
  • May 2011
  • April 2011
  • March 2011
  • February 2011
  • January 2011
  • December 2010
  • November 2010
  • October 2010
  • September 2010
  • August 2010
  • July 2010
  • June 2010
  • May 2010
  • April 2010
  • March 2010
  • February 2010
  • January 2010
  • December 2009
  • November 2009
  • October 2009
  • August 2009
  • June 2009
  • May 2009
  • April 2009
  • March 2009
  • November 2008
  • September 2008
  • May 2008
  • February 2008
  • August 2006
  • Benefits Squeezed Tighter Than Agent Commissions

    February 23, 2015 by Cyril Tuohy, cyril.tuohy@innfeedback.com

    Who doesn’t love the phrase “managing expenses,” so long as you are the one conducting the expense management?

    But when carrier executives talk about expense management, look out. For agents, it’s a signal that leaner times lie ahead. For agents who haven’t yet felt the wrath of slimmer margins affecting carriers, perhaps they should prepare to shave a few points off their commissions.

    John M. Nadel, managing director at Stern Agee & Co. in New York, said commission rates have come down a few points over the past few years.

    By how much and how often depend on the agent and the carrier.

    When spreads narrow, as they have done over the past few years, carriers use their management levers to maintain profit margins. One of those levers is to cut down on the commission rate. Another consists of pulling back on benefits.

    For agents selling fixed annuities yielding 2 percent in a 10-year environment, it’s hard to make money when rates are so low, analysts and industry observers said.

    “The spread is under pressure,” Nadel said. “You can’t get to make it up so one of the ways companies have to do that is to cut commission rates.”

    Astute agents understand the pressure carriers are under. Changing compensation structures are related more to low interest rates than they are to the quarterly performance numbers delivered by carriers, said independent advisor Doug Warren.

    Warren, a Temecula, Calif.-based seller of annuities, said low interest rates and concerns over future market volatility are having an impact on the costs of options carriers buy to credit index annuities. Carriers are reacting by changing cap rates and payouts.

    “I haven’t seen compensation coming down too much,” he said. “I’ve seen the benefits come down more than the compensation.”

    Besides, trimming a commission rate by a few basis points won’t necessarily push him to quote different carriers’ products, he said.

    “Everyone needs to win,” he added. “In order to deliver good value to customers and agents, carriers have to remain profitable. Low interest rates hurt profitability.”

    Carriers complain that they, too, are in a tight spot.

    Yields on invested assets keep falling as new premiums and cash flows generated by investments are reinvested at rates below the portfolio rates.

    Achieving a 4 percent average yield on new investment isn’t possible without taking on more risk. Carriers may or may not be comfortable taking on that additional risk.

    “Spread management may be more challenging in 2015,” said John Matovina, president and CEO of American Equity Investment Life Holding Co. in West Des Moines, Iowa.

    The company, a leading issuer of fixed annuities, reported fourth quarter net income of $31.2 million or $0.39 per common share diluted, compared with $51 million, or $0.64 per common share diluted in the year-ago period.

    Josh Mellberg, president of J.D. Mellberg Financial in Tucson, Ariz., said that as long as carriers need to attract capital and make their internal numbers, they will stay away from fiddling too much with the agent commission structure.

    Carriers prefer tweaking the annuity guarantees, like, say, extending the terms of an annuity from 10 years to 12 years or even 14 years, before touching agent compensation.

    Mellberg, one of the nation’s top annuity sellers, said carriers would much rather consumers cool to an annuity before souring an agent off the product due to lower commission structures. The reason is because building distribution networks takes a long time.

    Once companies hit their capital target, then they will drop their rates “but they need to hit their goals first,” he said.

    “One company may cut commissions, but another may pull back on the lifetime benefit riders,” said Steven D. Schwartz, an analyst with Raymond James Financial.

    Michael White, owner of the bank-insurance consultancy that bears his name, said lower interest rates mean pressure on carriers to lower contract guarantees. Stingier guarantees can lead to less commission to agents.

    “The agent looks at it and says, ‘I can’t afford to sell this, I’ve got to go sell something else,’ “ White said in an interview with InsuranceNewsNet. “Right away the commissions that particular carrier has to pay go down.”

    Big carriers sometimes “act like the big rooster in the farmyard,” he said.

    “As an agent, you take what they give you,” he said. “If an agent leaves, the carrier says, ‘You’ll come back to us when we get back in the market because we know you want to sell our A-rated products instead of some other carrier’s.’”

    “Carriers have been cutting commissions, I’ve heard that gurgling up from producers,” he said.

    Not that annuities or life insurance contracts are going away anytime soon no matter how low interest rates are prepared to drop or whatever tweaks carriers are tempted to make to product guarantees or agent commissions.

    “Companies have figured how to be stable while offering these products that people need,” said Frank O’Connor, vice president of research and outreach for the Insured Retirement Institute.

    “The population is going to continue to age, and with 10,000 a day heading into retirement, that need is not going away” O’Connor said.

    Originally Posted at InsuranceNewsNet on February 23, 2015 by Cyril Tuohy, cyril.tuohy@innfeedback.com.

    Categories: Industry Articles
    currency