Insurance CEOs Clash with Agents Over Compensation Models
Translated & summarized from Globes by baba
Four Israeli insurance company CEOs debated compensation models with hundreds of insurance agents at a conference in Eilat. CEOs of Clal and Migdal argued the current system encourages "twisting," harming policyholders and investment. Harel and Menora Mivtachim CEOs defended the agents and the existing model, calling the discussion "unhealthy" and "simplistic." The head of the Agents Association proposed rewarding agents for client retention instead.
The story in 5 lines · by baba
- Insurance CEOs clashed with agents over compensation models at a conference in Eilat.
- CEOs of Clal and Migdal argued current models encourage "twisting" and harm policyholders.
- Harel and Menora Mivtachim CEOs defended agents, calling compensation discussions "unhealthy."
- The head of the Agents Association suggested rewarding agents for client retention.
- The debate focused on whether compensation incentivizes long-term service or frequent client switching.
An unusual confrontation occurred at the annual Insurance Agents Association conference in Eilat, where the CEOs of four major Israeli insurance companies, Harel, Menora Mivtachim, Clal, and Migdal, engaged in a heated debate with approximately 600 insurance agents. The core of the dispute centered on the current compensation model for agents, which two of the CEOs argued encourages excessive client "twisting," or frequent switching between insurance providers, ultimately harming policyholders.
Yoram Naveh, CEO of Clal Insurance, warned that this trend of "excessive churning" in pension products and across the industry is out of sync with global norms. He explained that this behavior negatively impacts investment managers, leading to a focus on liquid assets and less investment in alternative assets and infrastructure, which ultimately harms savers.
Ronen Agassi, CEO of Migdal Insurance, echoed these concerns, stating that the current compensation structure is unhealthy because it pays agents the full commission upfront for sales, rather than incentivizing long-term service. He argued that this model encourages agents to move clients from one provider to another, creating market distortions and neglecting the need for continuous client service.
However, Nir Cohen, CEO of Harel Insurance, defended the agents and the existing model, calling the discussion of compensation "unhealthy" and suggesting it's a private market matter. He contrasted independent agents with salaried sales representatives, noting that agents are only compensated upon success and that the current focus on compensation is "populist."
Michael Kalman, CEO of Menora Mivtachim, also sought to appease the agents, describing the topic as sensitive. He emphasized that the quality of professional decisions made over decades for pension products is more important than minor price differences, and that judging solely by compensation rates is a "shallow and simplistic" view.
Moshik Ben Porat, President of the Insurance Agents Association, countered by suggesting that insurance companies could incentivize agents to retain clients. He proposed measuring and rewarding agents for not moving clients, implying that companies' focus on profitability could be redirected to reward client retention, potentially reducing the need for large client retention departments.