CALIFORNIA CONSUMERS CAN CUT LIFE INSURANCE COSTS; COMMISSION REBATES NOW LEGAL, THANKS TO PROP 103
CALIFORNIA CONSUMERS CAN CUT LIFE INSURANCE COSTS;
COMMISSION REBATES NOW LEGAL, THANKS TO PROP 103
ENCINO, Calif., July 14 /PRNewswire/ -- Consumers in California are missing out on millions of dollars in potential savings on their life insurance costs, according to Encino insurance broker Kenneth B. Avery, president of Advisors' Resource Group, an independent insurance brokerage firm.
"One of the best-kept secrets in California is that it is now legal for insurance brokers to pay rebates on the commissions that are built into the cost of insurance -- and it is now legal for consumers to ask for those rebates," said Avery.
But the insurance industry has kept silent about these savings, according to Avery, so few consumers know about them. Avery's Encino-based firm is one of the first in California to offer rebates to insurance buyers.
Avery points out that the long-standing ban on commission rebates was repealed as part of the insurance reforms enacted under Proposition 103 in 1988.
The freedom to negotiate rebates was overshadowed by the controversies relating to auto insurance rate rollbacks mandated by California voters through Prop 103, he noted.
According to Avery, who has a background of 20 years in the insurance field, commission rebates can represent a substantial amount of money.
Typically the commission paid by large, conservative life insurance companies is 50 percent of the first year's premium, and in some cases as much as 70 percent. For example, a 50-year-old man buying a $2 million whole life policy would pay an annual premium of approximately $31,000. The broker would receive a commission of $15,500. In this example, Avery rebates 60 percent of this commission to the buyer, for a saving of $9,300.
Avery offers rebates of up to 90 percent of the first-year commission, depending on the size of the premium. (Commissions in subsequent years are much smaller, and reflect the cost of the broker's services to the policyholder.)
Avery said commission rebates represent free market competition, which historically has been opposed by insurance companies. Only California and Florida permit commission rebates. Florida's Supreme Court ruled that the ban was illegal.
"The consumer is benefiting from price competition in many types of financial services," Avery stated. "Commissions on stocks, bonds and real estate transactions, for example, have been negotiable for years. It's time for the insurance industry to get in step with progress. They should provide the insurance buyer with the information to negotiate the best possible price.
"I welcome competition, and so should the insurance companies."
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/CONTACT: Alex Auerbach of Auerbach & Co. Inc., 818-501-4221; or Ken Avery of Advisors' Resource Group, 818-784-6464/ CO: Advisors' Resource Group ST: California IN: INS SU: CH-JL -- LA003 -- 9526 07/15/92 12:02 EDT