The Central Bank of Ireland has said it is concerned by a lack of sufficient quality controls relating to incentives paid to sales staff of life insurance companies.

Publishing its findings from a themed inspection into sales incentives, the bank said there was an insufficient use of penalties or deterrents against poor sales practices other than “clawing back” the initial commission earned on the product sale.

The bank said the payment to life insurance sales staff of incentives based “fully or largely on the achievement of sales volumes or sales targets” may encourage short-term sales behaviours that are not in the best interest of consumers.

'Poor practices'
"The structure of remuneration arrangements has a substantial influence on the behaviours of relevant staff, and the potential to drive poor practices where incentive schemes are short term.

“Firms must ensure that sufficient weighting is given to quality assurance factors in order to prioritise good behaviours.”

The bank said insufficient emphasis was placed on linking quality measures and behaviours to incentive payments such as the individual’s compliance record, the number of complaints upheld against them or any measurement of customer satisfaction.

"We expect firms to design, implement and oversee incentive schemes that ensure good behaviours and reward quality consumer sales and service," Central Bank director of consumer protection Bernard Sheridan said.

Remedial action
As a result of the recent inspection, the Central Bank is requesting all insurance firms to review their remuneration arrangements, and to take any remedial action necessary.

The bank said it expects firms to make changes to sales quality monitoring and governance structures “as soon as possible rather than waiting for a full review of any such scheme”.