The Netherlands Authority for the Financial Markets (AFM) is positive about a new remuneration model that has been elaborated by several insurers and authorised agents. In the case of successful implementation, this model provides for a proper elaboration of the standard for appropriate fees for authorised agents and guarantees appropriate remuneration.
The AFM recently performed an exploratory survey into the fees received by authorised agents and the AFM identified major peaks in those fees. The AFM saw commissions of up to 40% of the gross premium against an average fee for the authorised agent that amounted to 8.4% of the gross premium.
Michiel Denkers (head of supervision AFM): "We previously expressed our concerns that the customary remuneration models do not contain suitable guarantees for the appropriateness of remuneration and consequently entail the risk of steering. Our investigation shows that those concerns are justified. We sometimes see high peaks in the fees, while this does not involve any additional activities. It is therefore good that several market parties, both insurers and authorised agents, have taken the initiative to create a new model. This model constitutes a sound elaboration of the open standard and reduces the risk of inappropriate remuneration to a large extent. According to the initiators, the model also offers sufficient scope for innovation and entrepreneurship. We are confident that other parties will adopt this new model".
The standard for appropriate fees for authorised agents has been in effect since 1 January 2012. This standard is intended to prevent authorised agents from being steered by the fees provided by insurers for the sale of insurance policies to consumers, self-employed workers without employees and corporate clients. The standard is also intended to prevent a waterbed effect resulting from the ban on bonuses and commissions. These rules ensure that perverse incentives are removed.
The new model assumes a nominal rate per policy for insurance products for consumers and self-employed workers without employees. As regards corporate insurance, it provides for a value-linked fee with strict guarantees for the appropriateness of the fees.
The AFM is committed to promoting fair and transparent financial markets.
As an independent market conduct authority, we contribute to a sustainable financial system and prosperity in the Netherlands.