The announcement that Providend will be offering commission rebates might not seem like something new to their fee paying clients. After all, Providend’s fee paying clients get a rebate of all the commissions that they pay.
What is new, however, is that Providend is now offering this rebate to their non-fee paying clients as well.
According to the terms of this Providend insurance promotion, 50% of the commissions will be rebated back to the client. This rebate applies only to term plans, and not whole life or medical plans.
For now, they are running it as a limited time promotion till 16th August 2013. But depending on the response of the market, they might very well extend it indefinitely.
When Fundsupermart (FSM) launched a similar insurance rebate promotion a couple of months back, I had talked about the possibility of someone else copying their strategy.
True enough, this has happened with Providend firing the first salvo.
If others follow suit, we will then see distribution costs for insurance products being driven down further like what happened in the stock broking and unit trust industries.
To survive, many insurance agents could change their strategy to selling more of investment-linked plans (ILP), where the pricing component might not be immediately obvious to consumers.