Million-dollar packages not that unusual, say insiders

Top insurance agents can earn hundreds of thousands a year, but million-dollar packages are certainly not an everyday affair.

In a ruling last week, the High Court awarded $4.026 million for the loss of earnings to a former insurance agent, after a bad reference cost him a new job that came with a handsome package.

The judgment noted that "the total compensation which the plaintiff would receive under this package was $2.25 million", but that it was subject to several conditions, including the clearance of reference checks.

These eye-popping numbers are not that rare as poaching is rampant in the industry, say market players. But poaching whole teams with million-dollar packages makes more sense than poaching individual high-fliers.

Agents working for a specific insurance company, known as tied agents, can join an agency or set up one. The structure for an agency is such that it can have several teams of people. In each team are the financial consultants, their supervisor and the director.

Mr Alfred Chia, chief executive of financial advisory firm SingCapital, noted that the Monetary Authority of Singapore stipulates that there cannot be more than three tiers in the structure.

An ideal management structure, said Eternal Financial Advisory chief executive Viviena Chin, is to have one leader to oversee between 10 and 20 representatives.

Experts say tied agencies could have different ratios and, when that happens, the structure may not work as effectively.

When a policy is sold, the financial consultant gets about half of the commission - the amount depends on the term and type of policy, and includes renewal commission. The other half goes to the manager.

Market players note that the remuneration cannot be more than the first-year premium of the policy sold. Total commission payments are to be spread out over a minimum period of six years.

Market players say people neglect the fact that an insurance product is for the long term, and agents have to continually serve the policyholder, which is why the remuneration is seen as fair.

For top performers, taking home something in the region of $1 million is possible. The reasons include a more educated workforce that is more receptive to buying insurance, as well as growing incomes over the years.

But market players note that these top earners are a small percentage. There is also greater competition from banks selling insurance, while online channels could increasingly add to that.

SingCapital's Mr Chia said: "Having a financial package to attract agents to move over is not a healthy practice, as it uses money, instead of investing time in training."

A version of this article appeared in the print edition of The Sunday Times on August 20, 2017, with the headline 'Million-dollar packages not that unusual, say insiders'. Print Edition | Subscribe