Partners’ fall in medical business ‘lower than anticipated’
Partners Life has seen a lower-than-expected drop off in medical business in the wake of axing upfront commissions on medical insurance products.
Friday, November 23rd 2012, 6:49AM 
26 Comments
by Benn Bathgate
Managing director Naomi Ballantyne said there had been approximately 10% fewer applications since the September 1 commission changes came into effect, when upfront commission was replaced with commission paid on an ‘as earned’ basis, where advisers get paid as each premium is paid to the insurer.
Ballantyne said Partners Life was forced into changing the commission structure as they ended up writing far more medical insurance than estimated, and the relative lack of reinsurance financing for medical cover meant commission payments were coming out of capital.
“When we launched we thought we’d do about $2-$3 million of medical premium in the first year and instead we did more like $12 million, which meant we just had to keep raising capital in order to pay medical commissions, which just seemed crazy.”
She said there was some concern that the change would also see a knock-on effect on other benefits written alongside medical cover, as brokers moved to providers paying upfront medical commission, though this failed to materialise.
“Unsurprisingly the bulk of the slowdown was in applications with medical and only a small amount of other cover, such as life cover.”
Ballantyne also said volumes had increased in November, matching their expected seasonal trend.
“I think we can now confirm that the overall impact on our business is about 10% - which is lower than we had anticipated.”
Ballantyne said Partners Life remained on target for their business plan this year and had “caught up” on service delivery.
“We were running hard to catch up with the volumes of work that we were doing so we’ve got the resourcing right now, so business is good.”
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 27 November 2012 at 10:06 am Johnny D said:
Interesting... I wonder what OnePath's production looks like at the moment. On 27 November 2012 at 12:36 pm zak said:
Why are you so fixated on OnePath Mr D ? They are owned by a bank, capitalised correctly and from our experience have kept their service standards throughout the onslaught from Partners. They are a great underwriter and will remain so for a long time yet.
In Naomi's own words "When we launched we thought we’d do about $2-$3 million of medical premium in the first year and instead we did more like $12 million, which meant we just had to keep raising capital in order to pay medical commissions, which just seemed crazy.” It seems a little worrying that they cannot accommodate circa $10 million of additional premium/commission on their balance sheet– what does this say about their financial strength and for that matter what is their financial strength rating right now?
On 27 November 2012 at 12:40 pm Vinnie said:
Yep - and we all continue to ponder why the market only grows by around 3% annually, and why there is still an unacceptable percentage of Kiwis with no insurance. On 27 November 2012 at 2:20 pm Amused said:
Zak - Part of the reason Partners Life have proven so popular amongst advisers is that they actually address the issue of resourcing seriously. OnePath (and I really mean ANZ Bank) don't seem to have a focus on making sure service standards are maintained. Like everything else the ANZ touches they try and run their operations on the smell of an oily rag (look at how they resource their broker unit in Auckland for a prime example!) No wonder so many experienced OnePath staff have since journeyed across to Partners. Your staff are your biggest asset in business, without them you are nothing but ANZ always seems to think otherwise. OnePath are now paying the penalty for this ignorant stance with many advisers electing to place their clients at Partners Life and elsewhere for cover. It’s almost comical to watch a big bank like ANZ squander all the talent and opportunity that was Club Life/ING Life when they acquired it. On 27 November 2012 at 3:34 pm zak said:
Amused your tirade against OnePath may be your experience but it has not been ours - each to their own. But back to the question at hand what is Partners Financial Strength rating - does anyone know? Amused it seems to me that you should have this at hand given all that business you are putting their way. Having the financial ability to pay claims today, tomorrow and out into the future is what clients demand not that you have a great relationship with them. On 27 November 2012 at 4:25 pm Johnny D said:
@ Zak, is that you Jeremy N? On 27 November 2012 at 4:55 pm Dirty Harry said:
From Partners website. " We would re-assess whether that cover would have been offered and on what terms, had that material information been available at application time. Any decision whether a claim can be paid or not will then depend on this re-assessment "
So differentiating by pointing out they do something everybody else does. All an adviser should expect is that a claim will be paid if it's a claim. Period.
If a company is struggling to pull the funding together to pay commissions, can only scrape a B++ rating (1 in 30 chance of default within 5 years, A+ is 1 in 300) and might be owned by KiwiBank one day anyway, why would I recommend them?
On 27 November 2012 at 6:53 pm Amused said:
Zak - having handled a big health claim for a Partners Life client recently I can speak first hand of Partners ability to pay claims (and promptly I might add). I hope you are not seriously suggesting that an insurer's financial strength rating is the ONLY thing an adviser should focus on when making a recommendation to his/her client? You seem to have bought the OnePath email of 20th Sept this year hook, line and sinker. Partners having a B++ rating currently isn't bad considering they are only the new kid on the block so to speak. Care to guess what Club Life’s initial rating was when they were first started?
I still give business to OnePath now and then Zak but when you compare Partners Life on features and benefits, premiums, underwriting outcomes and general turnaround times its pretty bloody hard to go past Partners Life as an insurer for my clients. As I said in my earlier post above ANZ had such a golden opportunity with Club Life/ING Life and they stuffed things up royally. Yes I am sure they (OnePath) are scrambling now to repair the damage but it’s too little too late for many advisers. It only takes someone like a Naomi Ballantyne to come along and do things better and smarter which doesn’t say much of the calibre of the senior management teams for the various life companies and who is running their day to day operations nowadays.
On 27 November 2012 at 9:59 pm Observer said:
Can I ask a question of the so called 'professionals' in the insurance industry.
I get that competition is healthy, and I get that each person has their preference as to where they choose to submit business. That is what is called a free market and freedom of choice.
The question then is if as an industry you hold yourself to be professional, then why looking in from the outside, is there so much self-interested opinion on this site.
I do not see so called industry sites for professionals like accountants and lawyers where practitioners waste time with such self-interested, and at times, frankly moronic observations.
To be considered professional one must at the very least act like a professional, and based on a number of the comments on this article and others I have read, it will be a long time before the general public begin to view the you as insurance professionals vs. product floggers.
This type of site would be of great benefit to consumers (who can access this articles), to help educate on the value of insurance, and relative educational content of an article. I would venture to suggest that most consumers would read a large number of the comments and think to themselves why on earth would I bother with insurance if there is so much wrong with the industry, because that is the impression one gets.
On 28 November 2012 at 8:15 am Vinnie said:
Very interesting to read all the different comments.
The facts (and they are facts) are that we are all bound by new regulations (FSPA/FAA), and we have to be able to provide a robust explanation as to why we made a particular recommendation for where our clients are insured.
To recommend a provider that only has a B++, reduced health commissions recently, and would appear to be in need of significant capital I find particularly difficult.
Service standards are a very nice to have, certain and predictable outcomes (for decades to come) when my clients need claims paid are an absolute must to have.
On 28 November 2012 at 8:59 am zak said:
Johhny D no I am not Jeremy N sorry - sounds like a smart bloke though - hahaha.
So if Dirty Harry is right Partners rating is B++ compared to AA- for OnePath. I am sure all those customers moved from OnePath to Partners will sleep well knowing this fact especially as the global economy rock and rolls over next few years. By the way Amused how was Vegas as it sounds like this was a higher priority than shoring the balance sheet for more medical premium or alternatively a higher financial strength rating.
On 28 November 2012 at 11:05 am Andrew said:
Observer, while your statements regarding the comments are somewhat on the mark. I would suggest you don't judge an industry on the outspoken majority.
The idea of "not bothering with insurance if there is so much wrong with the industry" is just unclear thinking.
Good to see an "outsider" taking an interest in the industry.
On 28 November 2012 at 12:05 pm zak said:
Amused there are two parts to paying a claim. Firstly the desire to do so and secondly the financial ability to complete that desire. My original question asked does Partners have the ability to pay over time. To determine this their financial rating is paramount. The world is filled with businesses that desire all kinds of things but lack the means to deliver. Back to the question what is Partners financial strength rating? On 28 November 2012 at 12:08 pm Amused said:
Zak - I never went to Vegas. My focus is on my clients and their best interests not whatever exotic location the insurers happen to have picked out each year. Africa for OnePath this year wasn't it?
You seem to be hung up on Partners current financial strength rating as the reason you won't recommend them to your clients. That is a real concern Zak and I feel sorry for the clients that come to see you for cover. On behalf of the majority of advisers in the industry that do use Partners Life please open your eyes! You owe it to your clients.
On 28 November 2012 at 12:14 pm Broker said:
How was South Africa Zak? Bit quiet? On 28 November 2012 at 12:48 pm Mac said:
It is fairly obvious that a start up life company will have a lower rating. I remember similar negative comments by my fellow advisers (and AMP et al) when Sovereign was in its formative years. Do the naysayers understand the concept of reinsurance treaties? On 28 November 2012 at 1:03 pm New Broker said:
I was told recently that PartnersLife have just had the rating agency in to look at their rating and that something in the A range is probable. I'm sure that will satisfy everyone who places the financial strength rating first and foremost. On 28 November 2012 at 4:20 pm Dirty Harry said:
Many have read Reality is Crazy. And the nay-sayers were calling Sovvy out on many fronts. Sov3 is here, but the market is different.
What is the same is the buying business with trips and commissions, product built to the ratings, and perhaps some loose underwriting. All things advisers go for. All things that caused a lengthy hangover for Sov1 and Sov2.
Mac: Reinsurance treaties are complex beasts. Two points on this: 1, if it's grey we will pay (so long as the reinsurers agree not that it's grey but is an actual claim because we haven't got much money and can't afford to go it alone so they actually pull the strings we just have a nice slogan)
and 2, the reinsurer agreement is with the insurance company, not the client. Where does that leave the client if the insurer goes broke?
On 29 November 2012 at 3:04 pm Mike said:
Cannot believe the level of pure vitriol becoming evident in this conversation - these are insurance providers, not AFL teams!
This is Year 21 for me and I recall the ways Sovereign both used to attract brokers. It may not always have been 'ideal'(especially if judged in today's climate & morality), but how else would a start-up, much derided, 'mission impossible' outfit like Sovereign have survived and indeed THRIVED if it had not so effectively converted so many newly-unleashed ex-tied agents?
And it wasn't just the incentives - the products were just so..DIFFERENT! and priced very attractively compared to what had been the dominant insurance culture.
A decade later, Club Life/ING (aka Sov 2) performed a similar service to the industry, and was also slagged and derided as a 'mission impossible'. Some people never learn.
Now, Partners (Sov 3)is once again kicking industry butt and changing the paradigm for us as we interact with our clients (who, let's face it, are not so interested in the actual product and its features, but in your/my ability to identify - with professional competence and confidence - and implement a plan that will perform when needed.
Maybe this time is different - in many ways, it is, given the financial & economic uncertainty. Maybe Partners WILL crash & burn and Zak will be able to start an'I told you so' thread. Then again, maybe not. After all, Naomi & the Coons have all done this before and we can be pretty sure they would have learned a truckload along the way.
More power to them.
On 29 November 2012 at 3:46 pm Dirty Harry said:
Mike you're so right. Some never learn. Coon and Coon and Ballantyne started Sov1, tied up the newly untied (SovNet), brought products and commissions and trips and all that stuff into the market and people lapped it up. Then they sold to CBA, who spent years getting over the loose underwriting and other practices.
Then Sov2. They bought in product and price and underwriting and half the staff at Sov1. And advisers lapped it up. They sold to ING who sold to ANZ. Now that medical product in particular is causing problems, along with the advisers who follow Naomi and flick clients from Sov1 to Sov2 to now Sov3.
Then Sov3. More product, ratings, commissions and trips and the pack lap it up. And one of the Partners directors is also on the board of KiwiBank....
On 29 November 2012 at 4:21 pm Broker said:
...and your point is Dirty Harry? I don't quite get where you are coming from. Do you dislike 1) product innovation? 2)an employees choice to move to another employer? and /or 3) the insurers incentives and trips (which they all offer lets face it)? Are you a tied agent stuck in 1970's? On 30 November 2012 at 12:44 pm Linus said:
What is all the focus on the Partners rating? Is it supposed to be scare-mongering that in the almost two years they have been going they "only" have a B++ ? What? You expected them to be an A+++ as soon as they turned the lights on? These people are not some guy who woke up some day and said "you know, I think i'll start up an insurance company" - They STARTED the companies you are staying fiercly loyal to. You are entitled to promote whom you like, but dont scrape the bottom of the barrel with talk of financial ratings because you cant actually find something of significance to back your obvious vendetta against Partners. On 30 November 2012 at 1:16 pm interested observer said:
@Broker... What product innovation has Partners introduced? Is picking the teeth out of the rest of the market innovation? I thought innovation meant bringing something new and different... but I guess if someone says it's innovative then it must be! On 30 November 2012 at 4:26 pm Amused said:
Well said Linus. I am sure most astute advisers agree with you also. On 30 November 2012 at 10:42 pm billy the broker said:
OK OK...got the point lets put this old chestnut to bed eh!! On 5 December 2012 at 11:59 am Hmm said:
Human beings are more rationalising than rationale... given the environment, there is no harm in being careful about who we select for our clients.... I do not think too many people can argue that Partners are any different seriously than some better rated companies... many advisers have been swayed by bulls*t "we love you dearly" messages from some managers/owners.. Sovereign were going to be our friends for life... more bullsh*t. Club was going to reward with shares, shall i ring TUI? and now this bullsh*t... new advisers without this history and evangalical adviser production groups will influence, along with the cash and self interest.. the economy being what it is has caused many advisers to rationalise change to Partners from current insurers... I see many folk here siting past insurers so called success as if it follows that the past will represent the future? Sign In to add your comment
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