AIA taking steps to stop poaching of Agents

Take a look at this article. I Got it off Patrick Lim’s blog.

If you are an insurance agent would you be enticed by these perks?

Aug 18, 2010

AIA pulls out all stops to plug manpower leak

Hit by staff exodus, insurer goes on ‘retaliation’ drive

By Lorna Tan, Senior Correspondent

INSURER AIA is countering poaching raids by rivals by paying huge bonuses to retain top agents while offering recruits up to 135 per cent of their previous year’s income as a sign-on sweetener paid upfront.

The AIA ‘retaliation’ programme is in response to an exodus of its agents to other insurers. Some experts estimate the company has lost about 700 agents from last year.

The initiatives are aimed at bolstering existing staff numbers while providing incentives for other firms’ agents to jump ship.

The ’sign on’ provision of up to 135 per cent of the previous year’s income is the most dramatic and easily trumps the 30 per cent upfront sign-on bonus offered by some insurers. At most, such insurers cap their incentive handouts at double an agent’s previous annual income.

AIA will also offer an additional benefit of up to 125 per cent of the previous annual income to be paid over the following three years, subject to conditions.
This could mean a recruit gets a total benefit of up to 260 per cent of his previous annual income.

So if an agent earned $300,000 in his previous job, he could stand to collect $780,000 over three years at AIA. But if sales quotas are missed or the agent leaves prematurely, AIA will claw back the benefit. The sign-on incentives are on top of the usual AIA commissions an agent earns from sales.

AIA also aims to stem the exodus of its own agents with a retention package – or ‘golden handcuffs’ – for top performers. A source told The Straits Times that AIA has already paid millions to its top producers to ensure that they stay.

In response, the Monetary Authority of Singapore (MAS) noted that aggressive or excessive poaching of agents by insurers is not a healthy practice.

’This could lead to undesirable consequences such as improper switching of policies and pressure selling by poached agents to fulfil the conditions of their migration,’ said a MAS spokesman.

It urged insurers to get together to exercise self-regulation as they have done in the past.

Improper switching occurs when clients are misled into surrendering a policy, resulting in a financial loss, so the proceeds can be used to buy a new plan with another firm.

The other weapon in AIA’s arsenal is a bonus plan under which agents can earn a $2,000 fee if they successfully refer another agent to the company.

If the recruited agent stays for a year, the agency manager can earn $10,000 over 12 months, subject to sales conditions being met.

AIA declined to provide the exact size of its agency force yesterday but it is believed that the firm now has about 3,300 agents, down from 4,000 last year. Prudential has 3,800 agents and Great Eastern 2,800.

Mr Kenneth Juneau, executive vice-president and senior regional executive and chief executive of AIA Singapore, recently said that it expects to recruit 1,000 agents this year.

Industry observers believe AIA’s strategy is an aggressive initiative designed to beef up its agency force before its initial public offering expected at the end of the year.

In the life insurance industry, big is seen as better as a larger force is expected to bring in higher sales.

The insurers’ aggressive tactics hit the headlines last November when The Straits Times reported that some companies were paying a lump sum upfront, with the total amount capped at the average of an agent’s last two years of income.
But the sign-on offers have shot up since, sparking massive poaching.

MAS added that it expects insurers to have proper recruitment standards to ensure that the agents they appoint are fit and proper. In addition, all insurers are required to have in place policies and procedures to monitor and detect improper switching activities.

’We will not hesitate to take supervisory action against insurers whose agents engage in inappropriate behaviour stemming from aggressive poaching activities,’ said MAS.

It emphasised that the charging of such recruitment and retention packages should be borne by the shareholders’ fund, and not the insurance or participating (par) fund which is accumulated from policyholders’ premiums.
This is because insurers are required under the Insurance Act to ensure that assets of an insurance fund are applied to meet the insurers’ liabilities and expenses only where they are attributable to the fund.

Still, Singapore Insurance Institute president Stanley Jeremiah called for clear regulations to protect the par policyholders from excessive sales incentives, recruitment and retention cost being charged to the par fund.
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PERKS FOR RECRUITS

# Sign-on provision of up to 135 per cent of previous year’s income
# Up to 125 per cent of previous year’s income paid over three years

KEEPING TOP AGENTS

# ‘Golden handcuffs’ of millions of dollars paid out as bonuses to top agents to ensure they stay

REFERRAL BONUS

# Agents get $2,000 for successfully introducing new agent to firm $10,000 to agency manager if new agent stays for a year and performs well