Individuals considering purchasing insurance products ought to be aware that there may be a conflict of interest present. Recently revealed was the fact that some insurance companies link sales of proprietary products, meaning their own company products, to health insurance benefits provided to the adviser. The insurance companies call it "validating your contract." But what it really is, is an end around NASD rules banning sales quotas. That's because those rules apply to investment products and not to insurance products that have no investment component.
What does this mean? It means that if you did business with Lincoln Financial Advisors you should know or should have known that there was a $50,000 gross direct commissions quota on proprietary products. If the rep didn't sell that amount, he or she risked losing health insurance for himself or herself and the family.
That firm is not alone. AXA Financial has a contract that sets a hurdle of 40,000 production credits, and in that case, non-proprietary product sales garner only about half the credits. How about MetLife? MetLife would pay lower commissions, end benefit plan participation and fire people for failing to meet proprietary product quotas. And advisers interviewed for this story also mentioned John Hancock Life Insurance, MassMutual Financial Group, and Prudential Financial. These are companies who use the leverage of the threat of losing benefits to encourage sales of their own proprietary products. What's up with that?
Source: InvestmentNews, Vol. 11, No. 11. March 19, 2007, "Quotas Tied To Benefits Irk Advisers" by Gary S. Mogel
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