Fidelity moves to renewal commission model
Fidelity Life is moving away from the battle to offer the highest upfront commissions on life insurance sales to a renewal commission model.
Wednesday, November 25th 2009, 8:05AM
by Jenha White
Chief executive Milton Jennings says it is the first company in New Zealand to go down this track, although Lumley Life, which Fidelity acquired several years ago did use a similar model.
"It's the way of the future, building a sustainable model stream to make business strong. It's good for clients and customer service - it reduces the churn factor," he says.
This renewal model is part of a new product Platinum Plus which Fidelity Life has launched combining the best parts of its Platinum Plan and Protection Plan as well as other new features.
The Protection Plan paid an upfront commission of 155% and renewal commission of 6.2% and the old Platinum Plan had 93% upfront and renewal commission of 18.6%.
The new Platinum Plus Plan has a range of options for advisers, they can choose from a 124% upfront and 16.2% renewal commission to 31% upfront and 34.8% renewal.
Jennings said an adviser can choose anywhere between these levels.
He says over the medium to long term the renewal model is better for advisers, however when an adviser switches it will take about three years until the model produces higher income for the adviser.
To help the change over Fidelity is increasing its renewal commissions on some of its existing business.
"We believe the market needs to move to a renewal model," Jennings says. "We just think it is the right way to go."
Jennings is on record as saying the battle between life companies to have the highest upfront commission models is unsustainable, and that the New Zealand market has some of the highest life insurance commissions in the world.
He reinforced this message saying they need to come down, but also acknowledged they don't need to come down too far.
Jenha is a TPL staff reporter. jenha@tarawera.co.nz
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