Is this Ethical

[marindependent]

Is the following scenario Ethical, Legal, Acceptable?

You own an insurance agency. You have producers and CSRs.

You sell essentially just two products. The products are the exact same. Same coverages, Same dedcutibles, both admitted products. These are annual renew policies, but there is nothing stopping folks from changing mid year.
Product A costs lets say $5,000 per year, Called Great Insurance, this product was launched say 5 years ago.
Product B costs lets say $1,000 per year Called Great Performance Insurance, this product was launched say last year
-Remember they are the EXACT same products, same coverage, same deductibles, same insurer, all the Ts and Cs are the same, and the same FSRs. Its basically the same product at a fifth of the cost.

Your agency markets the heck out of Product B to attract new customers.

Many of your exisiting clients are on product A. The questions are:
Do you have to inform all of your clients of the exisitance of the new product, Product B?
Is is Ethical, Legal, Acceptable to "forbid" your producers and agents to discuss Product B with Clients that have Product A?

Thank you for your time!

 

[adjusterjack]

Legal?

Here's the CA Insurance Code:

California Codes: Codes Tree - Insurance Code - INS

It's legal if it's not prohibited by the Insurance Code. I'll leave it to you to study up.

Ethical?

No. Not by a long shot. But that's just my opinion for the two cents that it's worth. Though there might be something in the Insurance Code about acting in good faith, similar to the fair claims practices section.

Acceptable

to "forbid" your producers and agents to discuss Product B with Clients that have Product A?

Acceptable is in the eye of the beholder. Acceptable to who? You give the order so it's obviously acceptable to you.

Is it acceptable to your producers and agents. Dunno. Ask them. It might be unacceptable to me if the first year commission on the $1000 product was more than the renewal commissions I was getting on the $5000 product. Might be the other way around if renewal commissions on the $5000 product were greater.

Acceptable to the clients?

Of course not. They'd be sorely pissed knowing that they could be paying $1000 for the same product for which they are paying $5000, all things being equal.

 

[toolbelt]

You've just described the cellphone and cable tv industry.

 

[marindependent]

You've just described the cellphone and cable tv industry.

Yes, however this industry has an element of people financial best interests.

 

[Allen Trent]

Not enough details. Is this a government run or sponsored program?

 

[rousemark]

Is replacing the higher cost policies a violation of your contract with that company?

 

[DHK]

Same dedcutibles, both admitted products. These are annual renew policies, but there is nothing stopping folks from changing mid year.
Product A costs lets say $5,000 per year, Called Great Insurance, this product was launched say 5 years ago.
Product B costs lets say $1,000 per year Called Great Performance Insurance, this product was launched say last year
-Remember they are the EXACT same products, same coverage, same deductibles, same insurer, all the Ts and Cs are the same, and the same FSRs. Its basically the same product at a fifth of the cost.

Impossible. Even for your hypothetical scenario, it's impossible.

There is no such thing as a free lunch. If something is "too good to be true", the insurer must be made whole in some way, shape or form.

There is always the 3-legged stool for insurance: company, agent, policyowner.

If you make things too good for the policyowner for a given premium, and if the agent earns the same, the company suffers... and eventually won't be around to pay claims.

Make things too good for the agent, something has to give, and it's usually benefits for the consumer.

Make things too good for the company, and the agent won't sell it, and the consumer won't buy it.

@Sheryl J Moore wrote about this years ago in NAILBA: Great Deals Won't Stay Great

If you sell this hypothetical lower-cost product, you'll be apologizing rather than being praised a hero to your clients.

I'd find a whole other company to represent that won't make such disparate differences in their product lines.

 

[Allen Trent]

There is always the 3-legged stool for insurance: company, agent, policyowner.

You missed the most important leg of the PC stool........trial attorney

 

[mudhound]

If you do not take care of your client. I will.

 

[Allen Trent]

If you do not take care of your client. I will.

Big I?

the largest independent insurance agency association?