How life insurance works in Ireland
th Jan 2017 |
Knowing how the life insurance works, from life insurance companies to life insurance tied agents and brokers, to switching provider. Find out more about the way the life insurance industry operates in Ireland and how you can benefit from knowing more.
Thankfully with improved regulation, there is a new emphasize on clarity and best advice these days. Moreover, every seller of life insurance, must not only advise their status as a seller, but also provide full tansparency on any payment they get, a s a result of making a sale.
No one likes a pushy sales person and let’s face it buying life insurance it not exactly on the top of any bodies shopping list.
Despite realising life insurances importance in protecting our loved ones, it’s not exactly an exciting purchase.
Like with most things, people want to keep it simply, but don’t forget about choice, with a little effort on your part, you will get a much better deal!
Life Insurance Companies – Product Suppliers
Life Insurance companies can we best thought of as the product suppliers, or manufacturers of life insurance products, its is always the life insurance company that any life insurance policy contract is with.
It is also the life insurance company that collects the premiums and makes the claim pay-outs, not the person selling you the cover.
Life Insurance Sellers – Product Retailers
The sellers of life insurance can be best thought of as retailers and like any retailers, big or small, they sell the suppliers product, some will offer only one product make, some a few different insurer products and some a full range of products from a host of suppliers, or in this case life insurance companies.
Life Insurance Seller Categories
You can buy life insurance from a range of sellers these days, so it’s every important to choose wisely.
Tied Agents – offer only one insurers product range, be they online, or offline sellers. So even with discount, they tend to be expensive and offer no consumer choice.
On-line examples include:
- Laya Life – Sells only AIG product
- VHI – Sells only Zurich Life
Off-line examples include:
- Financial Advisers in most banks.
- Direct sales agents from the life insurance companies.
Financial Brokers – offer a range of products from a host of life insurance companies.
There is a very important distinction here however, execution only brokers don’t offer advice only quotes, so amke sure to always check a financial brokers terms of business.
- If you want real choice use a financial broker.
- If you want real choice, combined with best value premiums, use an on-line financial broker, that offers advice, as well full market comparison and discounts.
Life insurance mortality tables
Life insurance mortality tables – show what the probability is that a person of a particular age, will die before their next birthday.
Using such tables, life insurance actuaries can determine the probability of surviving that year of age, and the remaining life expectancy for people at different ages.
Life Insurance Commissions and Fees
All agents of life insurance companies receive a commission payment from the life insurance company.
This includes the tied agent working directly for them in the bank or in the insurer branch office. It also includes both online and traditional financial brokers, be they advice based or execution only.
Some insurance companies may also from time to time offer bonus commission for the sale of their own products.
However, as a tightly regulated industry all sellers must abide by the consumer protection code and clearly provide both their status as an agent, as well as the terms of business under which they operate.
So, if buying life insurance make sure that you are firstly satisfied with the choice of insurance companies products offered to you and then ensure that you are happy that you are getting the best price.
Now to fees
Only a financial broker that offers a range of life insurance company products and that provides advice, can charge a fee directly to the consumer.
Most financial brokers will not however charge a fee for life insurance only advice, but may do so for investment type advice such as lump sum bonds and pensions.
However, if the financial broker provides a full financial review of your personal finances and you decide only to transact some of their recommendations, or not proceed at all, again they may charge a fee.
What’s important is to choose the financial advice that’s right for you.
On the subject of all life insurance products including: Mortgage Protection, Life Insurance. Serious Illness Cover and Income Protection, a financial broker can choose to reduce the level of commission they receive from the insurance company, which then has the effect of reducing the premium, quoted to you.
Some traditional brokers will choose to do this in order to compete with online discounted offerings, but it’s online life insurance that sacrifice commission as standard to reduce their price.
However, remember that getting the right policy is just as important as getting the best price, so when going online ALWAYS do the following to ensure both best advice and best price:
- Check their terms of business – they must provide a link on their website by law.
- Avoid “execution only” this means they don’t provide advice.
- Choose a financial broker to ensure choice.
- Avoid insurers own website and tied agents offering only one provider.
Even if you already have life insurance, it might be worth considering switching to save money. In fact switching can not only offer you a better price, but also improved added features too!
If switching, make sure to use a financial broker, so as to get the broadest choice.
Also, to ensure best advice, make sure not to choose an execution only broker, but an advice based online financial broker.
Remember too, that age and health are two of the most significant elements considered when calculating premiums, so if you are considerably older, or have experienced a health decline since taking out your existing policy, then it may not be the right move… your financial broker will advise you on this.
Ken O’Gorman – QFA
OneQuote.ie – Smart Financial Protection