Partners axes upfront medical insurance commission, ups premiums
Partners Life is to scrap upfront commissions on all of its medical insurance products from September 1, instead paying commission on an “as earned” basis.
Thursday, August 2nd 2012, 11:54AM 
17 Comments
by Benn Bathgate
The company is also increasing medical insurance premiums by 10% in a move managing director Naomi Ballantyne said was prompted by two factors; medical inflation and a need to catch up with the rest of the market.
“It’s never our intention to have a product that’s seen as cheap, and the other companies movements in their premium rates in the last three to six months left us in a position where we were significantly behind the rest of the market,” she said.
“We picked a number we thought kept us affordable and competitive but didn’t have that big jump between us and everyone else, we didn’t want to get a whole truck load of medical business.”
Ballantyne admitted that the commission changes would prove “challenging” for advisers, especially those who sold a large amount of medical cover, but said advisers would benefit from the changes over time.
“They’ll grumble because it will hit them in the pocket on September 1, but they will also recognise the value,” she said.
“As earned is truly spread so you get paid as each premium is paid to the insurer, so its totally funded out of the premiums. The advantage is that there’s no clawback, so if the policy runs for five months, with either of the upfront models you’d be paying all of your commission back.
“With an as earned basis, you keep the five months you’ve been paid, so there’s some advantages to brokers in that respect.”
Ballantyne said ‘as earned’ had two other advantages for advisers; as commission was paid every time a premium was paid, “the higher the premium, the bigger the number for the broker,” and it also had the potential to increase the value of their business as calculated by renewals.
Benn Bathgate is a business reporter for ASSET and Good Returns, email story ideas to benn@goodreturns.co.nz
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Comments from our readers
On 2 August 2012 at 2:29 pm Amused said:
Like everything Naomi does these changes announced to Partners medical insurance product are "smart" and well thought through. Thumbs up from me. On 6 August 2012 at 1:38 pm Mac said:
I'm sure these "changes" were simply a pre-planned strategy at the initial launch of the product. 'Amused', you are correct, the changes have been well thought through. On 7 August 2012 at 8:48 am la verdad said:
As with any new start-up insurer capital strain is the challenge, and I suspect this is what the move to level commission is all about. Just hope claims are not on a spread payment... On 8 August 2012 at 9:24 pm you must be joking said:
Amused and Mac. To us thinking advisers this is exactly what we have forecast. Is it reasonable to have a top line wording in a product which all insurers struggle to make a profit and expect that it will not be long before just this happens. Price up. Commission to a style that leaves more money in insurers pocket to help there now cashflow. All follows the history of the leadership of previous ventures from this group of business owners if you look at it realistically. Fellow advisers , to protect the ongoing reputation of our wonderful industry, to protect your clients and there familiies lets take of your commission driven, policy wording hats and act like real quality advisers and place your business with the proven insurers with high liquidity backing. am la verded may have hit the nail on the head. How will you feel about spread claims???Remember when this trend continues {the trend of undercapitilisation} it will be the unwell clients you will have to leave with Partners and there problems and there new owners who will buy it at bargain price like they did with Club , Onepath and Sentinal.Sadly many of you will just follow this group of owners to there next brand new insurance company. Mac and Amused- good changes-you must be joking. On 9 August 2012 at 11:48 am Gloria said:
A nice comment above from someone with a clear vested interest of their own.
As of yet I have had no problems with Partners, but we will see how the next 12 months pans out.
On 9 August 2012 at 11:59 am Sigh... said:
Nicely said Gloria.
Should we speculate on which insurance company they represent :)
Sometimes BDM's forget that we are smarter than we are cabbage looking.
On 9 August 2012 at 12:48 pm Majella said:
You must be joking, "You Must be Joking"! Once again, you kick the bejeezus out of Partners. I recall when Sovereign was getting the same treatment between 1989 & 1995. Would I be surprised to learn that you were one of Sovereign's knockers then? Not at all... On 10 August 2012 at 10:14 am Nifty said:
Well said Majella. My 40+ years in this great industry of ours tells me that some comments made reflect the views of the "tied" advisers of old, who knocked any company or adviser who chose to offer the client products that were best suited to their needs. It is a pity that advisers who are instinctively critical of any new company as being on the road to doom, and how dare they offer products that have improved benefits for ah, oh yes, "The Client" Advisers face competition regularly, and a fresh look at available products on the market has to be a good thing, and I note some of my companies are already reviewing and improving terms and conditions in their product range. Good for them! I too, also recall the angst when Sovereign was the new kid on the block. Look at their size and position today. On 10 August 2012 at 12:44 pm Amused said:
Very well said Nifty. 100% agree with your and others comments above. As you say it’s interesting how Partners arrival has seen other insurers now review their product range. Amazing what a bit of competition does eh? The cynic in me thinks that had Partners Life not come on the scene policy holders at other insurers would not be getting anywhere near the amount of new benefits been made available to them. Even if you happen to be a grizzled old "tied" adviser (e.g. You Must Be Joking) you surely can't be upset that your clients are now getting improved benefits passed on to them thanks to Partners arrival? Experience has taught me that unless insurers have to give something extra to policy holders they won't until competition forces them to. Naomi has always been synonymous with forcing change in the industry and if advisers are been objective we should all be thanking her for this on behalf of our clients who ultimately reap the benefits at claim time. As you wisely say this industry is supposed to be about the "client" not us. On 12 August 2012 at 4:15 pm billy the broker said:
Amused you are missing the point about Naomi! On 14 August 2012 at 10:23 am observer said:
@billy the broker - I am one that appears to have missed the point. Care to share. On 15 August 2012 at 7:06 pm Simple Consumer said:
...as a simple client who recently went through the process of purchasing medical cover I went against my brokers advice and went with a long standing, well rated company. I got burnt by finance company failures (broker recommended), my advice to friends is stick with an insurer who has deep pockets, has a secure rating, and preferably supported by a bank. (in my case I went with Sovereign). On 15 August 2012 at 8:55 pm billy the broker said:
When you get a business up and running and buy the business....you will always get issues...some good and some bad.
Having a re-insurer issue I would consider quite bad, would you not??
On 16 August 2012 at 11:04 am observer said:
@billy the broker. Interesting comment. Not quite sure where you are coming from here and not sure of your motivation for what seems to borderline to pretty serious allegations.
I see tall poppy syndrome is alive and well. Having spoken to a number of BDM's in the past from companies that provide medical cover, there has always been a desire to manage commission on a level basis, given the nature of the product.
Perhaps it is time to consider a move to level commission for all cover types. Now there's a thought, lets have commission structures that grow the assets base of a business.....hmmmmmm.
On 16 August 2012 at 10:02 pm billy the broker said:
@observer..nothing wrong with level commission. I for one am a great believer of it, more power to the broker who does this and grows his business.
But my friend a company that has been around two minutes suddenly makes a radical change to payment structure with out choice option for the broker, well that comes across as cashflow issues to me.
And Naomi stating that she is doing us a favor in case we get a writeback, how caring!!
And what is this tall poppy rubbish, personally I am not on a crusade in this forum about Partners, but it gets a bit tiring with all this drivel that we are being fed of how the new kid on the block is the best thing at the moment..and how much market share they have etc etc.
I really wonder when you look at the true stats how much of that market share is true blue new business. We actually had a quote from them on this site justifying moving/churning/twisting it under the guise of best practice.
But yet a few years ago with another company the same person was commenting how there was a real issue with churning/twisting for the sake of it!! Seems to me nothing has changed, they are just getting another suck of the sav yet again at the public's expense.
Why don't you hunt down a few so called brokers who have been to the States recently!! Now that's where the new biz has come from!!
@ simple consumer great comment and good choice made:) (I am not a tied agent with Sovereign).......
Because at claim time you want the company to have the ability to pay, not as I have heard on the grapevine try and bail on a claim time, especially when you took the cover over on takeover terms and plead non-disclosure etc etc...same story different day!!
Watch this space people, we will see how this one pans out!!!
On 17 August 2012 at 7:44 am Shally said:
billy and simple consumer - have to agree entirely. I have to say I have been absolutely gobsmacked at all the commentary and accusations. This is not about individuals or anything to do with history - it is simply about cold hard facts. And for those that cannot see the forest for the trees, a sudden change (reduction) to commission without any consultation or dialogue when you are 15 months into a start up is of major concern. On 5 September 2012 at 12:53 pm Another broker said:
Agree with Billy - I too wonder how much of Partners' business is new - my guess, from comments I hear is that very little is "new", and I find that fascinating, particularly given Naomi's various comments over the years on "churning"!
I have no problem with the change to "as earned" commission - there is good logic on both sides - i.e. for insurer and broker.
But to reinforce other comments, the point of insurance is to provide certainty to clients in times of uncertainty, i.e. death, illness or injury, and for me, insuring with an insurer with a B Claims Paying Ability rating provides less certainty than using an insurer with an A Rating.
And, for the record, I am not tied, have been a broker since 1983, and don't owe any insurer anything.
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