If lapse rates on protection cover increase as a result of the current market turmoil, advisers’ earnings could be hit from a new angle, warn providers .
According to Friends Provident and AXA, consumers unsettled by the fluctuating economy could start lapsing their cover in order to tighten their finances . Providers usually pay advisers’ renewal commission in a one up-front lump sum for either the first two or four years of a plan. However, if consumers stop their cover, providers will ‘claw back’ some of that amount which will hit advisers’ income.
Graham Harvey, managing director, protection, at AXA, says lapse rates, which also affect how providers calculate premiums, are typically around 10 per cent each year. He said: "I have not seen any evidence of (lapse rates going up) at the moment but if you are a smart adviser you will be thinking about this because there could be more claw back from providers."
Provider claw-backs could hit advisers income
Financial Services > Income lnsurance > News
Provider claw-backs could hit advisers income
Tue, 07 Oct 2008
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