Sovereign says new adviser regulations hit sales in 2011
New adviser regulations that came into force last year had a negative impact on new business sales at Sovereign, chief executive Charles Anderson says.
Thursday, February 16th 2012, 7:26AM 
5 Comments
Despite this Sovereign recently had its A+ rating reaffirmed by AM Best.
While AM Best praised Sovereign's profitable operating performance, Anderson said the increased regulatory burden had hit the bottom line.
"Competitive pressure on premium rates and the difficulty in passing on higher regulation costs have impacted the company's new business profitability," he said.
"Adviser sales capacity has been negatively impacted by an increased demand for regulatory training and consequently the company's share of new business premiums declined in the year to June 2011."
Despite the fall in new business, Anderson said the company welcomed the new regulatory regime - including a greater focus on insurance company's credit ratings.
He said that the requirement for, and disclosure of a credible credit rating would soon be mandatory for all insurance providers.
"Some companies may struggle with this, but we believe anything that improves the industry's transparency and enhances consumer confidence is a good thing."
He also said Sovereign had fully embraced the new regulatory changes.
"As the market leader in life insurance, we see our role as setting the standard for the industry during this period of change, and into the future," he said.
"This has prompted us to invest time and money to up-skill our wide adviser base."
Anderson said that despite Sovereign seeing a fall in its share of new business premiums in the year to June 2011, the September 2011 quarter had seen something of a rebound "as adviser capacity has recovered to normal levels."
He said Sovereign saw an increase in new business over the September quarter by 24% on the same quarter last year, contributing to a 6.3% rise in overall market share.
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Comments from our readers
Anon's spot on with his comment above though. Trying to cut out the adviser in the "advice process" isn't going to win Sovereign (and OnePath) much loyalty from advisers when they look at where to place new business.
If you think for one minute that any new provider is not going to do the same somewhere in the future you are living in la la land.
When recommending a product to a client surely you look at the benefits of the product, not whether or not a company sells direct to the public.
Future distribution models will be dictated by market trends. If, as is the case at the moment, advisers continue to sit on large books of existing business and write a pitiful amount of new business, then expect to see more product providers looking to other means of distribution.
Amused may have forgotten that Partners Life commenced operations after a majority of advisers had completed their qualifications and authorisation. They were therefore less affected by the problems Sovereign identified.
Anon, if someone does decide to offer products through Jim's lawn mowing or Chrisco's to people with little or no insurance cover they will be doing a much better than a lot of advisers who are simply churning the same cover from one company to another on people who already have cover. This has done nothing to address the under insurance problem in the marketplace.
If you were a CEO would you not look to milk every cent from every avenue??
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