Sovereign fronts up with 230% offer

In its offering sent to the market this week, Sovereign will apply a basic initial commission rate of 230% across its TotalCareMax life rate for age policies.

Other Sovereign products including its level premium, compulsory group, TPD, trauma and health policies would not be subject to the new commission rate, a company flyer says.

The increase, which is understood to add about 20% above its previous maximum rates, will be available to all advisers but it is unclear whether Sovereign will pay volume overrides to advisory groups.

However, advisers in Sovereign's tied advisory group, SovNet will continue to receive a "loyalty bonus", expected to add a further 10% commission on top of the basic rate.

Sovereign's move has puzzled some market participants given New Zealand's already high, by world standards, insurance commission rates were expected to come under pressure, particularly with new tax rules for life policies due to come into force next year.

Barry Read, Newpark Financial Services general manager, said Sovereign was the third insurer to increase commissions recently.

"We were surprised [at the Sovereign increase] in light of the pending tax changes which insurers have been saying would increase premiums," Read said.

David Haak, Sovereign head of adviser distribution, was unavailable for comment.

Comments from our readers

On 15 October 2009 at 2:14 pm Adviser X said:

There's no additional bonus payable (apart from the already existing 10% SN loyalty bonus you mentioned) when taken with the 230%, plus it is essentially an olive branch for making the claw-back period 33% longer (for all products, inc the ones not on 230% initial commission) As generous as it sounds?

On 27 October 2009 at 9:23 am O for Overpaid said:

The strategy from Sovereign is obvious, buy as much Term Life business as you can before insurance commission disclosure becomes mandatory with a view to a large portion of it sticking mid to long term. Once commission disclosure is obligatory they will repackage an offering for advisers but you can bet your bottom dollar it won't be this obscene. Strangely enough a mate of mine was encouraged by his "independent adviser" to "switch" to Sovereign's fantastic rate for age product last week. No mention of 230% during that meeting. The fundamental flaw in the NZ market will never be addressed whilst these suppliers continue to compete on adviser remuneration and not market leading Product design.

Sovereign fronts up with 230% offer

Sovereign has jacked up its life insurance commissions to 230% as the battle for the third-party advisory space heats up.

Thursday, October 15th 2009, 5:49AM 2 Comments

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