Sovereign boost commissions; nib offers a new model

nib moves to spread commission offer as Sovereign boosts its advisers' pay cheques.

Tuesday, November 7th 2017, 12:00PM

by Susan Edmunds

Health insurer nib has launched a spread commission option for advisers, which its chief executive says should help them grow stronger businesses.

The model offers 35% upfront and 25% servicing.

nib chief executive Rob Hennin said it was designed to encourage advisers to take a longer-term view of their business.

“What we are trying to do is encourage advisers to talk to their BDMs and have that cash flow discussion, the increasing capital value discussion, growth discussion. To talk about how they lower the risk and volatilty in their business and grow a business that has long-term value and security.”

He said health insurance was a long-term proposition. Spread commission would encourage persistency, he said. “In the long-term the adviser is better off. The money works itself out. The most important thing, we think, is as the income stream changes it helps advisers adjust their attitude to risk and investment and to take a long-term view, they behave differently.”

Advisers who did not have to worry about so much income volatility could focus on investing in their businesses, he said, building marketing and customer service and creating higher quality businesses.

nib has an agreement with Fidelity Life to allow its advisers to distribute Fidelity’s life insurance products. That insurer has also had a focus on spread commission arrangements.

Hennin said he was not sure what proportion of advisers would take up the spread commission option but expected it would become the norm in future.

“If you’re in this game for the long term you want to align your revenue stream with your customer servicing model – you end up with the spread model. At the end of the day we just want to make sure we’re offering the customer choice and the adviser choice.”

Meanwhile, Sovereign has also changed its commission structure.

It has revealed that as of November 1, advisers would receive a minimum underpin of 80% production bonus and 14.25% quality bonus.

On a rate-for-age policies, the minimum commission will be 200% upfront. Level policies will pay 161% minimum.

Sources said it could be an attempt to claim back some of the independent adviser market share that has gone to other insurance firms over recent years.

A spokeswoman said Sovereign would not comment on its commercial terms.

Tags: Commission Fidelity Life Financial Advisers health insurance investment nib risk Rob Hennin Sovereign