LIA MEMBERS UNDERTAKING NO. 65/15 - LIA GUIDELINES ON SPAN OF CONTROL

Transcription

1 BY ONLY To: All Ordinary and Associate Members Members' Undertaking No December 2015 LIA MEMBERS UNDERTAKING NO. 65/15 - LIA GUIDELINES ON SPAN OF CONTROL ACTION: 1. LIA MEMBERS UNDERTAKING NO. 31/11 (T&C GUIDELINES) IS REPEALED IN TOTALITY. 2. FOR COMPLIANCE BY ORDINARY MEMBERS WITH TIED AGENTS WITH IMMEDIATE EFFECT 3. FOR OTHER MEMBERS INFORMATION LIA SECRETARIAT

2 Table of Contents Standard Model of 176 and Tier Structure of 1:10:15 1 Deviation within 176 Requires Approval of the Insurer 1 Assessment of Application 1 Deviation Beyond Regular Review of LIA Framework 2 Annex 1: Span of Control - Current Structure 3 Annex 2: Span of Control - Deviations 4 Annex 3: Letters of Warning Permutations 5

3 Standard Model of 176 and Tier Structure of 1:10:15 1. The standard agency unit (Group) comprises of no more than 176 persons in total and within it the standard tier structure is as follows: Tier 3 = 1 Agency Manager. He/she can have up to 15 Agents under him/her and/or up to 10 Tier 2 Agency Supervisors. Tier 2 = 10 Agency Supervisors. He/she can have up to 15 Agents under him/her. Tier 1 = Agents (max 15 under 1 Supervisor). Refer to Annex 1 for details 2. The insurer must have a process and controls in place to ensure that 176 (overall) is not breached and also a regular review/control mechanism to continually monitor those units where a deviation has been approved. The Agency Managers or Supervisors who are allowed to deviate will be reviewed on an annual basis to ensure that they continue to adhere to the prescribed standards of deviation. The basis of annual assessment is the same as those stated under point(s) 6 & 7 and Agency Managers or Supervisors who fail the review will have their deviation revoked and will not be allowed to replace their direct representatives or supervisors until they revert back to within the standard span of control model of 1:10:15. During the period between a failed assessment and reverting back to within a standard 1:10:15 model, the insurer would need to exercise enhanced oversight of the Manager/Supervisor and demonstrate that progress is being made towards the standard model. The Agency Manager or Supervisor will be allowed to re-apply for deviation approval again 12 months from the date of the earlier failure and subject to prevailing requirements. Deviation within 176 Requires Approval of the Insurer 3. Whilst keeping within the 176 (overall), the insurer has the discretion to approve a deviation of up to a further five persons, i.e. A Supervisor shall not exceed 20 Agents A Manager shall not exceed 20 Agents or 15 direct Agency Supervisors A Manager would only be allowed to deviate either the number of agents or the number of supervisors, but not both. This avoids the deviation process becoming overly complex and/or difficult to control. Refer to Annex 2 for details 4. Deviation is subject to the insurer s formal and documented review process requiring approval from both the Chief Agency Officer or Chief Distribution Officer or equivalent and the Head of Compliance or Chief Risk Officer. Assessment of Application 5. Individual Supervisors/Managers would need to submit their own unique deviation application. Applications would be assessed separately & independently from other units within the same Group. The decision(s) to allow (or not) a deviation would not necessarily be the same as other units within the same Group. In other words, not necessarily every supervisor within a Group would be approved to deviate. Page 1 of 5

4 A Tier 2 (Supervisor) would need to submit a deviation request for his own unit. A Tier 3 (Manager) would need to submit a deviation application to clearly distinguish between a deviation request for additional Tier 2 Supervisors or a deviation request for additional Tier 1 Agents within his own direct unit. 6. A Supervisor/Manager would need to meet (all) at least three industry benchmarks before approval for deviation would be considered: a) Overall persistency rate of at least 1% higher than the insurer s standard requirement for promotions/incentives, etc. For a Tier 2 Agency Supervisor, the persistency rate measured would be his/her unit. For a Tier 3 Agency Manager, the persistency rate being measured would be his/her own direct unit for a deviation application for additional Tier 1 Agents, and his entire Group if the deviation application is for additional Tier 2 Supervisors. b) Letter of Warnings At a Direct Unit Level - No more than two Letters of Warning within the previous 12 months. For a Tier 2 Agency Supervisor, the measure would be his/her unit (himself/herself + his/her Tier 1 Agents). At a Group Unit Level - No more than four Letters of Warning issued to his/her entire Group (and spread across no more than 2 units*). For example, a Tier 3 Agency Manager with up to 4 Letters of Warning spread across 1 or 2 agency units would be considered for deviation. In the same example, if the 3 or 4 Letters of Warning were spread across 3 or 4 agency units, approval for deviation will not be granted. Refer to Annex 3 for details A Tier 3 Agency Manager is seeking a deviation for his own Direct Unit, the maximum of two Letters of Warning within his/her unit would apply. *This control is designed to control Groups with wide(r) scale misconduct but acknowledging that 1 or 2 isolated problems are not necessarily a reflection of poor managerial oversight at a Tier 3 level. c) A minimum of 24 months supervisory experience. 7. Insurers may set higher and/or additional requirements above and beyond the industry benchmarks. 8. Insurers are not required to notify MAS of each deviation under this process. Deviation Beyond The LIA is not proposing to allow for deviation beyond 176 at this time. Regular review of the LIA framework 10. The LIA will review this framework on a regular basis to ensure that it is relevant and updated. Page 2 of 5

5 Annex 1 Span of Control (Current Structure) Manager 15 Agents 10 Supervisors 15 Agents Maximum Span of Control = 176 Page 3 of 5

6 Annex 2 Span of Control (Deviations) Option 1 Option 2 Or Maximum Span of Control = 176 Maximum Span of Control = 176 Page 4 of 5

7 Annex 3 Letter of Warnings (Permutations) LOWs Units 1 Unit 2 Units 3 Units 4 Units 0 N/A N/A N/A N/A 1 N/A N/A N/A 2 N/A N/A 3 N/A 4 5 Page 5 of 5