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Lumley Life seeks to by-pass troublesome upfront agents’ fees

Newcomer Lumley Life is trying to change the way commissions are paid to agents.

Wednesday, June 27th 2001, 10:36PM

Lumley Life knows it faces hurdles convincing insurance agents to accept its no-upfront-bonus commission structure.

But the British-based insurer, which began offering life products here in November 1999, believes its collaborative approach to product design and its focus on long-term commission structures will win acceptance from agents.

Instead of paying a high up-front bonus like most insurers, Lumley Life pays a higher renewal commission than most of its rivals, Lumley Life general manager Jon Lloyd says.

This flatter commission structure shift agents’ focus from seeking new business to servicing their existing client base, Lloyd says it also reduces surrender rates.

"The surrender rate in Australia for all business across the book is about 18%. For Lumley it’s only 11%."

The traditional commission structure here almost encourages agents to move clients’ business every few years to reap upfront bonuses, Lloyd says.

He acknowledges selling Lumley’s longer-term approach to agents won’t be easy but says the flatter commission structure has been operating in Australia since 1992 and has worked well there.

In Australia the long-term income flows agents receive have become an asset that in one case has been used as security for a loan, he says.

Until recently Lumley’s life products have largely been distributed through a joint venture between the insurer and agents, known as the National Partnership, which currently has about 15 members.

Lloyd says Lumley will now widen its distribution network to include more agents outside the partnership.

He says a key point of difference for Lumley’s products is that agents belonging to the National Partnership have played an active role in designing them.

"They’ve let us know what consumers and agents are looking for."

Agents are also active in marketing and all facets of customer communication.

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