This innocuous sounding descriptor has created heated discourse in the group insurance industry for the last couple of years, and it appears that the storm has blown itself out for now.   Not many employers that I’ve spoken to were familiar with Guideline 19, (G19) or the controversy that it created. This is unfortunate as it has a significant impact on any organization sponsoring an employee benefits or retirement savings program.

Historically, there has been no requirement for commission disclosure in the group insurance space. Commissions are most commonly imbedded in premiums and Investment Management Fees (IMF) and not detailed on the billing statements, insurer-generated renewal reports or other forms of plan member documents. As such, this matter flies under the radar of many plan sponsors.

First, some background into the organization that put forth G19. The Canadian Life and Health Insurance Association (CLHIA) is a membership-based organization that represents the majority of Canada’s life and health insurers.

One of the CLHIA’s objectives is to provide principles in the conduct of the business for the life and health insurers who are members. CLHIA Guidelines are designed to promote consistent practices and standards for the life and health insurance industry and to reinforce the best interests of consumers and the industry.

There are several CLHIA Guidelines in place that have affected your employees and perhaps you without even realizing it, such as G3, which ensures consistent administration practices amongst the insurers and G4, which brings consistency to how insurers handle coordination of claims.

G19, Compensation Disclosure in Group Benefits and Group Retirement Services, is the most recent Guideline that CLHIA has presented, in early 2018. Without going too much into the discourse that ensued since G19 was proposed, it is safe to say that is was met with significant dissatisfaction from the vast majority of the advisor community (to be clear, Hillcrest has been in support of G19 from the beginning as it aligns with our commission disclosure practices) and a lot of push back to CLHIA, resulting in G19 being withdrawn on May 31, 2019.

The challenges with this withdrawal for plan sponsors is that the lack of disclosure about the commissions that they are paying may result in excessive costs that cannot be managed if they aren’t known. Organizations that report to a Board of Directors, Funders or Investors, or who seek to maintain their Accreditation standards should be identifying the commissions that are paid on their benefits and retirement plans in the spirit of transparency and due diligence. In not hovering over these details, plan sponsors can also jeopardize the fiduciary responsibility they have to their employees, particularly in regards to the fees paid on the group retirement savings program

From the employee’s perspective, when they are sharing in the cost of the premiums, commissions which are excessive can result in less take-home pay. Commissions on group retirement plans are incorporated into the Investment Management Fees which are generally employee-paid as a percentage of their investments. Every basis point of commission charged through an IMF comes out of an employee’s retirement savings account and can have an impact on their financial security in the future, particularly over the course of a career.

So what does this mean to you as a plan sponsor? Are we suggesting that you should not be paying commissions on group insurance products? No, that’s not what we’re getting at. While it is fair to say that we’re biased, we know that advisors play a very important role for plan sponsors as strategic partners and experts in the complex world of benefits and retirement programs. We feel that G19 creates opportunities for plan sponsors to increase their awareness and maximize the value they receive in exchange for the fees that they pay.

What should you expect from your advisor or consultant in exchange for the commission you pay? An independent advisor works for you, the plan sponsor, and represents your best interests to the insurers. They work hard to understand your business in order to support you to build and maintain meaningful programs that are aligned with your philosophy. On a tangible level, this means:

• They provide you with the reporting and in-depth analysis to predict the cost of your benefits program well in advance of the renewal. This means quarterly reports that keep you apprised of the financial health of the plan. At Hillcrest, we present our reports in person to allow us to always have a strong relationship with our clients and proactively address any concerns with the program.
• They understand that the dollars you spend on the benefits and retirement savings plans are a significant part of your overall compensation and are wasted if employees don’t understand or value the programs. At Hillcrest, this means that we work with our clients to communicate their programs in a way that is tailored to their organization, with unique education programs designed just for them as well as a variety of forms of communication to explain the benefits and even the overall compensation.
• They provide you with insights and trends to help you stay ahead of the curve and also protect you from liability. This can take place in a number of ways; through your regular communications with each other, via the advisor’s blogs, articles and newsletters, and specific to Hillcrest, through the luncheon series for our clients and network that we host on a quarterly basis.
• They are transparent. You will have a detailed description of the services they provide in exchange for the commissions that you pay them. There will be an annual process to review if this promise was kept as well as how much was received in commission. We show our clients the actual dollar amount we earned each year at their renewal and have a frank conversation to make sure that we are exceeding their expectations every year.
• They care. This will be apparent through their words and actions and the general feeling you get when they talk about your organization and your employees.

If you are unsure what your advisor earns in commissions, give them a call and find out. If you would like to learn more about Hillcrest’s services, give us a call and let’s have coffee.