Protection Update 21st January 2022

Protection update 21st January 2022

Commission Options, Vitality Speakers Program, Zurich Updates & February Roadshow Reminder

Hi everyone,

You should have seen my note this week about the launch of our Elite proposition where we’re going to take a more targeted approach to how we support you and your business and there is a lot of work going on behind the scenes including the adviser site which will in itself have lots of new and rich content to support you.

Obviously, part of that has seen us republish our commission tables. These are in a new format to what you might have seen before and in this week’s protection update, I just wanted to point a few things out from a generic point of view with regards to commissions.

It just got me thinking that there’s never any training courses on how it all works and what’s the best strategy for you and your business.

Now I’m going to do a much bigger piece of work on this, so watch this space, but first of all… we know that typically for protection business; you can get paid indemnity or non-indemnity.

Indemnity commission is where the life offices ‘indemnifies’ the commission.

What that means is you get an up-front payment of commission which carries an earnings period.

Typically, we’re talking about a 4-year earnings period or a 2-year earnings period, but we’ve also got 3-year earnings period with some providers.

The earnings period means the length of time the policy needs to be in force with the policy holder paying those monthly premiums before your out of the woods and we avoid a clawback.

Now I’m sure you know what a clawback is?

That’s the bit of the commission the provider paid you up front that you now owe them because the policy actually lapsed before you reached the end of the earnings period.

Non indemnity is where you get paid an equal amount for each month of the earnings period.  So, if that’s 4 years, you get paid 48 times.  But obviously at a lower amount because it’s 1/48^th of the commission each month – but in actual fact, providers typically pay a much higher-level commission if you opt for non-indemnity.

So, I like to refer to these 2 methods as ‘up front’ or ‘on the drip’.

But, did you know that there is sometimes a different way to get paid your commission?

Well for example, Aegon will allow you to choose what they call “Level Commission”.  This is like non indemnity, but you actually receive that commission for the entire term of the policy.

It’s around 30% of the monthly premium.

Did you know that?

Another interesting quirk and you’ll see this on the new commission tables is what I call “Mix and Match”.

What do I mean by that?

Well, it’s the ability to choose between 4-year terms and 2-year terms within your business.

Several providers who offer 2-year terms say that IF you choose 2-year terms; you cannot use 4 year terms.  That door is closed.

And it’s actually something to do with the way their systems work.  They literally don’t have the ability to let you switch between those different terms.  This happens at AR level which means all advisers within the firm have to go along with that stance.

Some advisers like the ability to choose which policies you use 2-year terms for and which policies you use 4 year terms for.

Commission rates are always lower for 2-year terms than the 4-year equivalent.

So that’s something to think about.  Again, I’ve added that detail to the commission tables so you can see exactly which providers this applies to.

On the other hand, some providers DO let you mix and match your agencies.

So for that piece of business there; use 2 year terms and limit your risk exposure.

But for that piece of business; use 4-year terms and get paid more.

We’ve also got several providers who will pay a significant amount more commission for indexed linked policies.  So, this is where the cover and the premium is going to increase over the term of the policy, which is why you get paid more.

And the final thing I wanted to point out is that some providers allow you to really play around with the split of indemnity and non-indemnity commission for the same case…

The provider which springs to mind as having the most versatile flexible commission options is Guardian and I’ll be recording a podcast with them to illustrate just how this works.  It’s quite remarkable when you see just how many options you actually have and hopefully we can publish that next week.

Vitality Winter Speaker Series

Now I got a note from Vitality this week just to plug their winter speaker series which has some really excellent speakers.

There’s a webinar happening next Wednesday between 3pm and 4pm with Professor Hal Hershfield who is a Professor of Marketing, Behavioural Decision Making, and Psychology at UCLA’s Anderson School of Management.   He’s actually dialling in from the United States.

It says on his website that Hal is committed to the work of helping people make better long-term decisions…

The session is called “Connecting our Current and Future Selves” and  “Maximising our Healthspan”

It sounds intriguing and I think it will be a really good session to join in next Wednesday.

I’ve added a link to this weeks protection update where you can register for that.  It’s even CPD’able

Register for the Vitality Webinar with Hal Hershfield >>

There’s another one in February with Gabby Logan and then in March, there’s another webinar with Dr David R Hamilton but I’ll add those links in a bit nearer the time.

Zurich Product Updates

This week Zurich has rolled out a new stand-alone Critical Illness proposition and you’ll see this on SolutionBuilder.

Standalone Critical Illness is a growing market and it could be a good fit for people who don’t want a combined life insurance product or might find themselves in a position where life cover could be more difficult to get – armed forces perhaps.

Zurich have also reported an enhancement to its TPD benefit whereby customers will automatically be offered ‘Work Tasks’ should it be unable to offer the current ‘Own Occupation’ definition.

The ‘Work Tasks’ definition means they will pay out the sum assured if a customer, through illness or injury, is permanently unable to carry out three out of six specified work tasks: walking, climbing stairs, lifting an object, bending, getting in and out of a car or writing.

Age limits for TPD have also been increased, with the maximum age on application raised from 54 to 65, with customers able to claim until their 71st birthday (from 60th).

Meanwhile, Zurich has developed the functionality for Relevant Life trusts to be fully completed online, eliminating the need for signatures and physical copies of the trust, speeding up the process.

There was an article to cover all this, this week and CIExpert director, Alan Lakey, made a good point that “Zurich considers terminal illness cover to be a critical illness condition so whilst the standalone plan will not pay out on death it will pay out if the client is deemed likely to die within the next twelve months,”

Roadshows in February – book on now

And don’t forget we’ve got our roadshows happening in February.

These were originally set up as:

So if you want to join your regional colleagues – book that date.

But in actual fact, these are all being delivered on line so just choose the date which is most suitable and we will see you there.

So that’s it from me for another week.

Have a great weekend.  See you soon