DOL fiduciary rule proposal to restrict, ban some producer compensation - Insurance News | InsuranceNewsNet

InsuranceNewsNet — Your Industry. One Source.™

Sign in
  • Subscribe
  • About
  • Advertise
  • Contact
Home Now reading Video
Topics
    • Advisor News
    • Annuity Index
    • Annuity News
    • Companies
    • Earnings
    • Fiduciary
    • From the Field: Expert Insights
    • Health/Employee Benefits
    • Insurance & Financial Fraud
    • INN Magazine
    • Insiders Only
    • Life Insurance News
    • Newswires
    • Property and Casualty
    • Regulation News
    • Sponsored Articles
    • Washington Wire
    • Videos
    • ———
    • About
    • Advertise
    • Contact
    • Editorial Staff
    • Newsletters
  • Exclusives
  • NewsWires
  • Magazine
  • Newsletters
Sign in or register to be an INNsider.
  • AdvisorNews
  • Annuity News
  • Companies
  • Earnings
  • Fiduciary
  • Health/Employee Benefits
  • Insurance & Financial Fraud
  • INN Exclusives
  • INN Magazine
  • Insurtech
  • Life Insurance News
  • Newswires
  • Property and Casualty
  • Regulation News
  • Sponsored Articles
  • Video
  • Washington Wire
  • Life Insurance
  • Annuities
  • Advisor
  • Health/Benefits
  • Property & Casualty
  • Insurtech
  • About
  • Advertise
  • Contact
  • Editorial Staff

Get Social

  • Facebook
  • X
  • LinkedIn
Top Stories
Video RSS Get our newsletter
Order Prints
April 4, 2024 Video
Share
Share
Tweet
Email

DOL fiduciary rule proposal to restrict, ban some producer compensation

By John Hilton

For an industry that has struggled mightily at times to attract producers, the changes to compensation accompanying the new Department of Labor fiduciary rule are no small concern.

Repeated studies show a very high attrition rate for insurance producers entering the business. It adds up to “a dying distribution” system, said Sheryl Moore, CEO of Moore Market Intelligence and Wink, Inc.

"I think that we're gonna lose quite a few insurance agents if the DOL gets their way," she said, "and that could be devastating to pre-retirees who need to hear about annuities."

The DOL fiduciary rule proposal is far from a done deal. It is expected to be published in the coming weeks, and industry opponents stand ready to go to court.

Given that the current rule is the fourth iteration of the blanket fiduciary standard sought by DOL regulators, it is clear they are not giving up. Compensation remains the bullseye at the center of the DOL rule target.

The DOL wants to bring all retirement plans and individual retirement accounts under Employee Retirement Income Security Act of 1974 rules. ERISA’s fiduciary responsibility rules mandate that ERISA plans pay no more than “reasonable compensation” to service providers, which includes advisors.

Prohibited transaction exemptions allow for additional forms of conflicted compensation, but there are limitations.

“Financial Institutions may not use quotas, appraisals, performance or personnel actions, bonuses, contests, special awards, differential compensation, or other similar actions or incentives that are intended, or that a reasonable person would conclude are likely, to result in recommendations that are not in Retirement Investors’ Best Interest,” the proposed rule reads.

Compensation details to come

There are more details to come before the impact on compensation is fully known, Moore explained.

“It's up in the air at this point because DOL hasn't defined what is ‘reasonable compensation,’” she noted. “When I started working in the life insurance space, we had annuities paying 17% commissions. So, the 5% or 6% commission that we're seeing paid on a fixed annuity or an index annuity in my mind is reasonable when you consider where we've been.”

Samuel Greenes owns Blue Insurance Agency, with locations throughout New Jersey. The DOL is making a mistake equating insurance agents and life insurance with advisors and securities, he said.

“There are legitimate reasons for incentive payments based on loss ratios, persistency metrics, or premium growth targets in insurance – they reward customer satisfaction and loyalty,” he said. “As an independent broker, I have always viewed my responsibility as putting my client's needs first. But I cannot properly serve their risk and insurance needs without running a stable, profitable business, too.”

An independent insurance producer for more than 20 years, Greenes fears that the new rule will “put many insurance and financial professionals out of business.”

“We perform an essential service for consumers in understanding risks and tailoring insurance products to mitigate exposure,” he said. “If you suddenly eliminate our means of being paid fairly for this highly skilled work, it will not end well for either brokers or the public we serve.”

Eliezer Zupnick is the founder and CEO of Zupnick and Associates, an employee benefits insurance agency. The DOL seems to favor fee-based financial recommendations, he said, for better or worse.

“The fiduciary rule could lead to a shift towards fee-based client service arrangements,” he said. “While this could potentially align the interests of the advisor and the client, it may not always be cheaper than commission-based arrangements.”

'Apples to oranges'

Comparing an advisor charging a 1% fee to an agent getting a 5% or 6% commission is an “apples to oranges” comparison, Moore agreed.

“In the long run the insurance agent is going to be paid less than the advisor who's charging AUM [assets under management] just because the commission on an annuity is a one-time commission, and it's paid at point of sale,” she said. “There's usually no renewals or additional trails, because 97% of deferred annuity [applications] choose a heaped commission option where it's paid all upfront.”

Few new insurance agents survive even to year three in the business, statistics show. If their compensation is cut, it will be even tougher to retain those new people, Moore said.

But there is hope, she quickly added, if producers would bet on themselves and opt for trail commissions instead of getting paid all upfront. A trail commission structure means regular commissions are paid based on the annuity's account to the producer over a set time period.

“A trail commission option type of compensation actually ends up being more lucrative for the agent if the business persists,” Moore said. “Over a longer period of time they could be paid more. But I think the insurance agent is so hesitant to use a trail commission option, just because that contingency is the business has to persist.”

InsuranceNewsNet Senior Editor John Hilton covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected]. Follow him on Twitter @INNJohnH.

© Entire contents copyright 2024 by InsuranceNewsNet.com Inc. All rights reserved. No part of this article may be reprinted without the expressed written consent from InsuranceNewsNet.com.

John Hilton

InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected]. Follow him on Twitter @INNJohnH.

Older

NAIC regulators fire up dormant accelerated underwriting proposals

Newer

Commentary: NAIC should not allow Europe to write our insurance rules

Advisor News

  • Why your clients should be planning for healthcare costs in retirement
  • Why emotional readiness is one key to retirement
  • Moody's reprimands Uncle Sam for squandering Hamilton's vision
  • Bad online advice leads to bad financial decisions
  • Nationwide RetireAssist provides more options, flexibility
More Advisor News

Annuity News

  • American National Insurance Company Introduces Smart Start Accumulator Series
  • Security Benefit bolsters its Foundations Annuity
  • National Life: Strong 2024 sales led by 20% life growth, 17% annuity rise
  • LIMRA/LOMA targets consumers with Alliance for Lifetime Income merger
  • Legacy systems a big barrier to insurance industry digital marriage
Sponsor
More Annuity News

Health/Employee Benefits News

  • Federal Medicaid cuts would cost 13,000 Kansans their health care coverage
  • Reconciliation bill would cut $800B in health care spending, spike uncompensated care
  • House tax-and-spending bill and other Trump administration changes could make millions of people lose their health insurance coverage
  • Medicare Moments: How does Medicare’s fall enrollment affect me?
  • WORKING FAMILIES' HEALTH INSURANCE AT RISK
More Health/Employee Benefits News

Life Insurance News

  • 5Star Life Insurance Co. Named One of Forbes' Best Insurance Companies 2025
  • Insurers show strongest financial performance in a decade
  • Seritage Growth Properties Makes $40 Million Loan Prepayment
  • Jackson Awards $900,000 in Grants to Nonprofits Across Lansing, Nashville and Chicago
  • Life insurance sales up 2% in the first quarter, Wink finds
More Life Insurance News

- Presented By -

Top Read Stories

  • What Are Robinhood Event Contracts? Everything You Need to Know
  • LIMRA/LOMA targets consumers with Alliance for Lifetime Income merger
  • What cuts, 20% layoffs at NOAA might mean to insurers
  • Top Financial Stocks To Watch Today – June 7th
  • Plaintiffs seeks final OK of $69M UnitedHealth settlement in 401(k) lawsuit
More Top Read Stories >

NEWS INSIDE

  • Companies
  • Earnings
  • Economic News
  • INN Magazine
  • Insurtech News
  • Newswires Feed
  • Regulation News
  • Washington Wire
  • Videos

FEATURED OFFERS

Press Releases

  • RFP #T01625
  • TAG Advisors Adds New Specialty Markets Leader Carmine LaCognata
  • Royal Neighbors of America Celebrates 130 Years
  • WealthFeed Partners with Wells Advantage Group to Empower Agents with Next-Level Prospecting and Insurance Solutions
  • Wichita National Life Implements Hexure’s FireLight to Power Annuity Sales and Market Expansion
More Press Releases > Add Your Press Release >

How to Write For InsuranceNewsNet

Find out how you can submit content for publishing on our website.
View Guidelines

Topics

  • Advisor News
  • Annuity Index
  • Annuity News
  • Companies
  • Earnings
  • Fiduciary
  • From the Field: Expert Insights
  • Health/Employee Benefits
  • Insurance & Financial Fraud
  • INN Magazine
  • Insiders Only
  • Life Insurance News
  • Newswires
  • Property and Casualty
  • Regulation News
  • Sponsored Articles
  • Washington Wire
  • Videos
  • ———
  • About
  • Advertise
  • Contact
  • Editorial Staff
  • Newsletters

Top Sections

  • AdvisorNews
  • Annuity News
  • Health/Employee Benefits News
  • InsuranceNewsNet Magazine
  • Life Insurance News
  • Property and Casualty News
  • Washington Wire

Our Company

  • About
  • Advertise
  • Contact
  • Meet our Editorial Staff
  • Magazine Subscription
  • Write for INN

Sign up for our FREE e-Newsletter!

Get breaking news, exclusive stories, and money- making insights straight into your inbox.

select Newsletter Options
Facebook Linkedin Twitter
© 2025 InsuranceNewsNet.com, Inc. All rights reserved.
  • Terms & Conditions
  • Privacy Policy
  • InsuranceNewsNet Magazine

Sign in with your Insider Pro Account

Not registered? Become an Insider Pro.
Insurance News | InsuranceNewsNet