When an agent or broker (hereinafter referred to collectively as “agent”) sells a variable annuity, the agent may be paid a new premium commission (i.e., upfront) and trail commission (i.e., downstream). Trail commission is paid on an annual basis after the sale. Trail commission is paid so long as the variable annuity remains in force and the agent remains the current servicing agent of record.
At the time the agent sells a variable annuity to a customer, the annuity issuer (i.e., an insurance company) often gives the agent the option to select the manner in which commissions are paid. Typically, agents have the option to be paid higher trail commission in exchange for being paid a lower new premium commission. The annuity issuer, however, may later attempt to reduce the trail commission that should be paid to the agent according to the commission schedule in effect at the time of the sale of the variable annuity. In these circumstances, the agent should closely scrutinize the basis for the reduction in trail commission. The contract between the agent and annuity issuer may not authorize the annuity issuer to later reduce the amount of trail commission.
Joel Ewusiak represents agents and brokers in disputes with annuity issuers concerning the payment of trail commission. Please contact Joel for legal assistance with your specific matter.