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A percentage of life policies will always fall off the books

From Russ Stein

I am bored by the number of letters whinging on about life offices and the strategies they adopt when a policy lapses.

The fact is that we all know (at least those who have been in this business for a reasonable length of time know) that however well sold, a percentage of life policies will fall off the books.

I would be bold enough to say that provided a client fully understands the product and has been sold the best IFA rate available at that time, the chance of a lapse is reduced. Of course, a robust missed payment chase-up system is also needed.

Although rarely used, I know some brokers who use fee waiver agreements whereby professional fees are reduced or even waived on the understanding that a policy will run for, say, 48 months. This can act as protection for potential lost income should a policy lapse.

I know how frustrating it is when all your hard work comes to nothing but on the other hand a big policy can fall into your lap which earns you a mint. That’s sales.

It’s not rocket science to put aside a proportion of any life commission earned as a slush fund to absorb the occasional clawback.

Danny Lovey (Mortgage Strategy December 11) seems to suggest that it makes financial sense to accept a lower overall commission spread over 24 months.

This shortening of the earnings period is already available via some life offices although a 30% upfront non-reclaimable commission is the stuff of cloud cuckoo land.

And I have no issue with life offices clawing back commission after retirement either. Again it’s just a matter of making provisions. But claiming back unearned commission would be a worry, and that is an issue that won’t go away.

Russ Stein
Stein Financial
Swindon
Wiltshire

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