Southern Cross limits trail commission
Southern Cross is changing its commission structure, so advisers will not receive increased trail commission as their clients’ premiums rise.
Monday, July 22nd 2019, 6:00AM 
3 Comments
Kerry Boielle
Chief sales officer Kerry Boielle said the upfront commission paid would increase a small amount – how much was commercially sensitive – in recognition of the increasing documentation and compliance effort required from advisers.
She said this reflected the fact that most of the adviser's work was done around the policy being issued.
But the bigger change was that, instead of a percentage of premiums paid as trail each year, Southern Cross would pay a set amount per life insured.
She said that amount was sensitive information, too, but that if an adviser were paid $50,000 this year from Southern Cross, they would be paid $50,000 next year, too. But it would be expressed as a set payment per client and would then only increase with the CPI.
Boielle said it was more a service-fee approach that clearly remunerated advisers for their ongoing work with clients.
Because it was not tied to premium size, it would mean that if advisers replaced older clients with younger ones, they would not reduce their trail income.
But they also would not be paid more as premiums rose over time.
Health insurers have struggled with ongoing increases in health costs outpacing general inflation.
Boielle said a per-client rate was a more sustainable commission structure.
“It’s important to find a good balance between something that’s playing well for members and paying advisers for the work they do in a fair and consistent way.
"This change is part of our strategy of ensuring ongoing affordability for our members. As New Zealand’s largest health insurer it is our responsibility – and in the best interests of our membership – to keep costs to a reasonable level.
"Advisers play an important role in health insurance decision-making. This is a complex form of insurance and well-informed advisers can add significant value by helping their clients understand the relative offerings of the plans, benefits and loss ratios of each insurer."
She said about 20% of Southern Cross sales were through advisers.
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When Southern Cross talks about no change in remuneration, they are talking about the group scheme business, this probably won't change.
However, those advisers who have large retail books will have had 30 days notice that SX has wiped a good portion of their remuneration off the value of their businesses.
Not to mention that the people who need the most claim support are not group members, they are those that are chronically ill or retired on retail policies.
This move is going to make accessing advice at a critical time of life much harder for a significantly more vulnerable portion of our population.
One that had the foresight to take medical insurance and isn't subject to the public system, yes. But also one that has paid their premiums to find they now have reduced support.
I'm not an adviser with a large Southern Cross book, however, the approach and decision still fires me up, as ultimately the consumers that Southern Cross are saying they work for, are the ones going to be most impacted.
As to my book with Southern Cross, most of it is Southern Cross direct clients who have come to us because they need an adviser because they haven't had the support they needed. We haven't been paid for these either, but it does make the statement that only 20% of SX business is adviser introduced. They don't talk about the portion that is adviser serviced. Because they don't track that, they have no idea.
Unless it was originally adviser introduced.
So, like last year, SX has acted in a way that is all about SX, like last year's 30 days notice before the rug gets pulled.
Trusted brand, no longer in the adviser force I would expect.