Option to convert to Fee for Service

In order for a policy to be eligible to convert from a commission based structure to a fee for service based structure, the policy must satisfy the below criteria:
 

• Policy must be outside of any applicable responsibility periods;
• Policy must not already be on a P70 (30% discount) commission structure;
• Policy must be inforce and paid up to date and;
• The change must be requested by the servicing agent or dealergroup.

The discount that is applied to the policy when converted to fee for service would follow the below formula:
 

FFS discount (%) = 1 – ((1 – current policy dial down discount %) x (1- trail commission rate %))
 

Example:

Policy A is on P80, with a dial down discount of 20% and an ongoing commission rate of 10%, the discount applied for a FFS change would be:

FFS discount (%) = 1 – ((1 – 0.20) x (1 – 0.10))

                                = 1 – 0.72

                                = 0.28 = 28%

Accounting for both the current dial down discounts as well as the trail commission rates on the policy will ensure that the client will not be disadvantaged by any conversions on the adviser’s end.

No. Clients will not be able to request a conversion to fee for service on their own policy. This change must come directly from the servicing agent or their respective dealergroups. This is to ensure that we are in line with our distribution agreements. If a client requests this change, we will direct them to their servicing agent for further information and assistance.

The changes will be indefinitely applied to the policy. Currently, we are not offering any ability to convert back to a commission based structure for policies.

Our quoting software will have the functionality to generate quotes showing the change to fee for service and subsequent premium changes that will result. The quotes will continue to be generated via our usual channels.

The fees that are chargeable on the policy will be solely up to the discretion of the servicing agent and/or dealergroup and client. AIAA will not be determining the fees chargeable for a fee for service agreement.

No. The policy terms and coverage will continue as per normal, the only change that is applied to the policy would be the additional discount that is applied as a result of the servicing agent/dealergroup foregoing any trail commissions.

No. It is not possible to have both commission and fee for service on a policy in any given situation. The policy can either be on a commission based structure or a fee for service based structure.

No. Underwriting will not be required for a conversion to fee for service to take place. AIAA will only require a signed request from the servicing agent/dealergroup. Quotes will not be mandatory for requesting this conversion.

No. Unfortunately there will be no option to backdate a conversion to fee for service. The changes will be applied at the next paid to date on the policy.