Agents must complete tasks to earn their commissions in full

Agents must not rely on their principal’s goodwill to help them with part of their tasks (agency obligations to their customers) in delivering devices to their customers. This was highlighted in the following members’circular issued by the Persatuan Insuran Am Malaysia (PIAM) recently…. (for the purpose of this discussion, “principal” shall deemed to mean the insurance company that the agent is representing.)
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Please find the section of the PIAM’s circular for an understanding:

MEMBERS’ CIRCULAR NO. 138 OF 2012

27th September 2012

The Chief Executive Officer

Dear Sir

COMMISSION PAYMENT TO AGENTS

We refer to the above.

Arising from a special inspection conducted on a member company, it was established that the member company had paid agency commissions to Motor Dealers in cases where the insurer’s Call Center had also provided some services on the Dealers’ behalf, i.e the Call Center had made reminder calls to the renewal contacts provided by the Motor Dealers and also issued cover notes on behalf of the Motor Dealers for the successful renewals. The company had advised the Agency Board that some additional services like renewal of road tax to their customers, handling enquiries from their customers, etc were being provided by the Motor Dealers to their customers, thereby justifying the commission payment to the Motor Dealers.

The Agency Board took note that the prohibition on payment of commission under JPI/GPI 2 has provided that “……….no commission should be paid to agents for policies which the agents have not rendered any service in the transaction”.

The Management Committee has agreed with the recommendation of the Agency Board that for agents to be entitled to receive commissions, the agents must issue the cover-notes at the point of sale in addition to any other services such as renewal of road tax, handling enquiries from customers, etc. that may be provided by the agents to their customers. Member companies are requested to take note of the above.

Yours faithfully,

BY ORDER OF THE MANAGEMENT COMMITTEE
(THIS IS A COMPUTER GENERATED DOCUMENT AND DOES NOT REQUIRE A SIGNATURE)

SECRETARY

The message is very clear, if the principal provides some help or assistance with your agency renewals (no matter such act actually helps improve the principal’s renewal ratio), agents are no longer be entitled to any form of commission…. not even partially (yes, that’s what the circular states….) unless the agent is the final issuer of that cover to the policyholder. By saying “final issuer”simply means at that point of purchase or renewal, the agent must be the party that issue the cover not the insurer’s customers’ services department or some other departments…. Yes, the principal can still provide the necessary telemarketing assistance but the cover has to be issued by the agent at agent’s point-of-sales.

Notably, this is a common practice involving principals and motor dealer related agency; simply because large motor dealers have a better command of the agency-principal bargain and they are able to dictate that their principals must help them secure a certain percentage of the renewals due as one of the key performance indicators (kpi).

Of course on the other hand principals do gain in the process; they gain a higher renewal ratios but that should not be in the manner where the agents gained in the process without carrying out their full agency obligations and at the expense of their principals.

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