A heretical proposal: How about sharing risk with our annuity carriers?

All of us know that the current low interest rate environment is placing serious pressure on insurer margins. It’s getting harder and harder for the issuer of fixed deferred annuities to maintain profitability when interest rates are at these historic lows. According to one source, some carriers prefer to deal with the problem by extending surrender charge periods rather than cutting agent-level commissions. 

I have a suggestion (get ready the hot tar and feathers, folks!). Why not reduce agent commissions proportionally as the single premium increases? After all, it takes an agent little or no additional time and effort to sell a $200,000 SPDA compared to one for $20,000. I don’t propose reducing commissions for those small contracts because they pay barely enough to make the sales effort profitable. But, speaking strictly for myself, I don’t need to make $5,000 or $6,000 for selling a $100,000 SPDA, much less double that amount for selling a $200,000 one.