RBC Insurance has done an about-face. The insurer has just decided to offer the same discount to financial advisors' clients that it currently offers online to its home and auto insurance customers.
The decision was announced on April 27 at the Canadian Association of Independent Life Brokerage Agencies (CAILBA) annual general meeting in Niagara-on-the-Lake by Herb Huck, Director of professional advisory services at RBC Insurance.
Mr. Huck said that RBC Insurance never intended to bypass the financial advisor channel with its Internet strategy. He did not reveal how the discount would be offered to advisors' clients, but said that the insurer would soon distribute an information circular to explain the details. He also pointed out that the discount would only be offered to clients who have property and casualty insurance through RBC Insurance.
RBC Insurance's internet sales practices were discussed in the March issue of The Insurance and Investment Journal. The RBC Insurance web site describes an "exclusive offer" available to the company's home and auto clients, offering a 10% discount on the purchase of a new 10 or 20 year term life policy. The discount is only applied to the cost of insurance.
This discounting practice has been criticized by independent advisors and managing general agents across Canada. Since they are unable to offer this rebate, they fear that they could lose clients to the direct channel.
Michel Kirouac, Vice President and
General Manager of the MGA Groupe Cloutier, told FlashFinance.ca (a sister publication of The Insurance and Investment Journal) that he made it clear to RBC Insurance that he was unhappy. "The offer does not make any sense. It favours the direct channel at the expense of the advisor."
He says a client buying a 10-year term policy with a $50,000 annual premium will feel wronged by his advisor when he discovers that the same policy could have only cost him $45,000 on the Internet thanks to the discount. The disadvantage becomes even worse because the discount applies for the duration of the contract. The relationship between the client and the advisor will have been sullied permanently, he stated. This approach could also trigger policy lapses and commission refunds.
In his conversations with the insurer, Mr. Kirouac was told that the RBC Insurance offer was aimed at a different clientele, namely the term market. "That argument doesn't hold up since term policies contain a clause to convert to permanent coverage."
Pleased with the change, Mr. Kirouac believes that RBC Insurance was forced to re-evaluate the impact of its offer on financial advisors and managing general agents.
The Insurance and Investment Journal asked CAILBA's Chair, Peter Lamarche, for his reaction to the announcement. He says that the association was pleased but not surprised by RBC Insurance's proactive response. "CAILBA was not surprised. Our experience has been when insurers are aware of issues or inequities that may impact on their reputation and production with brokers, they are quick to address these." He added that RBC's decision was not a result of any discussions or negotiations with CAILBA. "It was purely a decision made by RBC executives," comments Mr. Lamarche. As of May 5, he also said that - as far as he knew - neither he nor any other MGA had received details from RBC explaining how or when the change would be made.
When do clients become eligible for the discount? What steps do advisors need to take in order to claim the discount for their clients? The Insurance and Investment Journal contacted RBC Insurance repeatedly during the week following the announcement, asking for answers to these and other questions, but RBC Insurance spokesperson Margie McNeil was unable to provide a response before the magazine went to press.