In yet another case of steering and hidden or contingent commissions Prudential Insurance settled with the State of California, and the state of NY, over the practice of undisclosed commissions paid to brokers and agents in their group sales division.
In reading the facts and remedies agreed to by the State of California Insurance Department it is abundantly clear that the days of off the books commission deals, marketing assistance, sales trips and incentives in the insurance industry are on their last legs. In much the same way that broker dealers in the equity world saw abuses bring about enhanced regulation, disclosure and curtailing of trips and incentives, the insurance world is about to join them in a dramatic change in how business is done. Just note the following aspects of the settlement:
1. Full disclosure at time of application to the client of base commissions to be paid, as well as any incentives or extra compensation potential.
2. Public disclosure by the Life market on it's web site of broker payment, commission levels and policies.
3. No joint ventures, revenue sharing or equity arrangements between brokers and the life market.
4. The end of trips, gifts and meeting incentives based upon production or sales levels.
5. An ongoing compliance program to be monitored by the life market.
Settlement brokers, it's coming to a life market near you soon so start making adjustments now.