Sources inform “Globes” that Israel Phoenix plans to change its model for agents’ commissions to a flat commission model. Under the new model, bonus commissions calculated according to the agents’ output in a given year will be completely eliminated. The decision was made by Israel Phoenix’s most senior level.
The transition means that insurance agents will receive the same commission over the life of the policy. Under the current model, agents receive most of their commission in the first years of the policy.
Israel Phoenix is expected to change to the new model in January 2004, with the beginning of the reform. Marketing of new life insurance options will also begin at this time.
Insurance sources expressed concern that if one company gives bonus commissions, it force the other insurance companies to follow suit. Sources inform “Globes” that at least one insurance company plans to pay agents 10% bonus commissions, while another company plans to eliminate these bonuses gradually, over a two-year period.
The last time an attempt was made to reduce commissions was in 2001, when new life insurance products were introduced. The attempt failed because then-Migdal Insurance deputy CEO Boaz Linenberg unilaterally increased commissions, forcing the other companies to adopt the same measure.
Israel Phoenix plans to present its portfolio of new insurance products to the Bank of Israel Insurance Supervision Department, with the model of loading 13% expenses, decreasing. This means that for every shekel in premiums, the company can take only NIS 0.13 in expenses (the company’s expenses, plus the agent’s commission) in the first year. This proportion will gradually decline to an average of NIS 0.11 per shekel premium. The agent’s commission will be a flat 5-6% per year.
The sources added that Israel Phoenix’s new products would be similar to Clal Insurance Enterprise Holdings’ “Profile” product, and would include investment baskets, under the unit link format. The steering committee for developing the new products has complete its work, and will present it for final approval at the upcoming management meeting.
The new products will include the following five investment basket alternatives, between which the policy holder will be able to switch at almost no cost:
- A share investment basket (at least 75% shares)
- A flexible basket (20-50% shares)
- A conservative basket (up to 15% shares)
- A bonds and deposits basket
- A foreign currency basket (at least 75% in foreign currency-linked instruments)
One-time depositors will receive the investment alternative registered under the current funds feature. A policy holder wishing to redeem part of his policy will be obliged to leave a minimum deposit an average monthly premium, multiplied by the age of the policy in years.
Published by Globes [online] - www.globes.co.il - on October 21, 2003