THE CENTRAL BANK of Ireland today warned of the risks of offering sales incentives to staff at life insurance companies.
The bank published the outcome of an inspection today and said it not intends to extend its findings and review to the banking and investment sectors.
There were a number of risks identified that the bank said may encourage short term sales behaviours that are not in the best interests of consumers including:
- Incentives paid fully or largely on the achievement of sales volumes or sales targets;
- Insufficient emphasis placed on linking incentive payments to things such as the individual’s compliance record, the number of complaints upheld against them, performance management results, education and training achievements or any measurement of customer satisfaction;
- Insufficient use of penalties or deterrence against poor sales practices other than ‘clawing back’ the initial commission earned on the product sale.
Commenting today, Director of Consumer Protection, Bernard Sheridan said the bank is “committed to promoting a consumer-focused ethos in all financial service providers”.
The Central Bank said firms must ensure that sufficient weighting is given to quality assurance factors and they are required to use deterrents against poor sales behaviours. It also said quality monitoring must be conducted and those charged with governance should ensure that future incentive schemes incorporate these requirements.
As a result of this inspection, the Central Bank is requesting all insurance firms to review their remuneration arrangements, and to take any remedial action necessary during 2014. It is also following up on any specific issues identified directly with insurance firms inspected.