Sales Commission Versus Product Performance in Financial Services

This book reports a study of universal life §insurance as a case study for analyzing the tradeoff §of selling commission against product performance, §using policies that have the feature of varying §sales commission by using a noncommissionable term §rider in the policy. This study first looks at §whether the use of the term rider has a §statistically significant effect on the policy's §performance over the long term. The study reveals §no statistcal significance, when measured against §other independent variables. The study then §performs a discounted cash flow analysis of four §different case profiles to determine what §improvements in performance a policyholder could §expect given various degrees of commission §reduction. The results indicate that there is a §tradeoff, but predictability is problemmatic. The §study is a cautionary tale to agents and clients who §assume any predictable result from commission §reductions in these products, and leaves the reader §with the question: Who then is getting the better §part of the negotiation over commissions in these §products? The agent, the client, or the insurance §carrier itself? This book reports a study of universal life §insurance as a case study for analyzing the tradeoff §of selling commission against product performance, §using policies that have the feature of varying §sales commission by using a noncommissionable term §rider in the policy. This study first looks at §whether the use of the term rider has a §statistically significant effect on the policy''s §performance over the long term. The study reveals §no statistcal significance, when measured against §other independent variables. The study then §performs a discounted cash flow analysis of four §different case profiles to determine what §improvements in performance a policyholder could §expect given various degrees of commission §reduction. The results indicate that there is a §tradeoff, but predictability is problemmatic. The §study is a cautionary tale to agents and clients who §assume any predictable result from commission §reductions in these products, and leaves the reader §with the question: Who then is getting the better §part of the negotiation over commissions in these §products? The agent, the client, or the insurance §carrier itself?