News Broker bodies back concept of level SME commissions


There is increasing support for the private medical insurance (PMI) industry to move to a level commission structure for SME schemes, following a special report on the issue by Health Insurance last month. The British Insurance


Brokers Association (BIBA) and the Association of Medical Insurance Intermediaries (AMII) are just two organisations which have come out in favour of the concept. But while both trade bodies backed the sentiment of level commission, agreeing that it would be in the PMI industry’s best interests in the longer term, they stressed that flexibility must remain to ensure different intermediary business models remain viable. Last month’s special report


highlighted fears that higher initial commissions could encourage churning as brokers move existing schemes simply for their own financial gain. Health Insurance has also exposed the practice of so-called “commission rebates”, whereby brokers agree to share initial payments with clients in order to win the scheme at a loss and generate renewal income in following years.


BROKER VIEW In response to the article, BIBA spokesman Steve Foulsham said that the way that commissions are skewed towards acquisition as opposed to retention are a legacy of when it was possible for a broker to obtain business, hand it over to an insurer “and then take a back seat”. “That is not real life nowadays for


any PMI professional, and it could be argued that it takes more time to properly service and retain a renewal than to put the business on the books in the first place,” he said. Foulsham said BIBA supports


a level commission structure between new and renewal business, “with perhaps an incentive for new virgin business’” to encourage overall growth and account for the


August 2011 www.hi-mag.com Last month’s special report on


SME PMI commission levels sparked debate across the industry


cost to an intermediary of longer acquisition periods. “If higher commissions are paid


for switch business it is inevitable that this will encourage churning,” he said. “What is required is a fair rate for the effort that intermediaries have to put into a renewal and year long management of their client’s business and an additional rate for acquisition of new but not existing business which is revamped to become ‘new’. Intermediaries are then free to pitch for clients based upon the value and enhanced service which they themselves bring.” AMII executive committee


member Lindsey Joseph said AMII believes that level commission as an industry best practice position is an “excellent” concept. But she added: “We appreciate that


different intermediaries have different business needs and the acquisition costs may well necessitate a higher initial commission. Either way, as an industry we need to ensure that our own needs are not the primary concern and that the client company’s experience is that of delivering a professional service that represents best practice and value based on the customer’s specific needs.” Brokers suggested it is too


simplistic of insurers to say that they would prefer the market to operate on a level commission basis in order to minimise churn. In May, PMI provider PruHealth sparked debate by moving to a level commission structure in response to what it said was the “unsustainable” commission-driven movement of schemes around the market. Gary Powell of Goddard Perry


Consulting, a specialist PMI advisory firm, said: “A broker has to do what’s in the best interest of their client and help to secure the most cost-effective terms. It’s a cheap shot of an insurer to imply that business is only


moving because it’s commission-led. If an insurer such as PruHealth is losing business, then they need to take a long hard look at themselves instead and ask why.” Powell questioned the impact a


move to level commission would have on larger intermediaries or those with commission clubs. He said: “Brokers wouldn’t have to


resort to such tactics as commission rebating if we were all competing on this supposed level playing field “It’s hard enough for the smaller


intermediaries to compete when they are up against the larger brokers who have bespoke arrangements and preferential pricing.”


INSURER VIEW Some insurers, from market leader Bupa to niche player Universal Provident, have operated on a level commission basis for some time. Linda Wallace, head of intermediary


management, Bupa Health and Wellbeing, said: “We believe that providing level commission is in the best interest of our customers, although from time to time we might vary our commission structure in the short term to support the launch of a new product or service. “Commission policy should allow


clients to make decisions about their healthcare needs based on the quality of advice they receive from their broker, the reputation of the provider and the quality of the product they are purchasing.” However, in terms of an industry-


wide position, a spokesman for the Association of British Insurers said that it “would not be appropriate for us [the ABI] to comment on any issues which may stray into competition law”.


HI


NOW HEALTH TECH SERVICES International private medical insurance provider Now Health International is offering instant online help to customers in choosing their preferred plan option. A “help me decide” function on www.now- health.com asks individual and company customers to answer three simple questions about their needs and the system then provides an option that best suits their circumstances. The provider has also introduced a free SMS service for customers. Texts can be sent to customers to notify them when plans are live, when membership cards have been dispatched, and when members have been added.


PRIVATE PATIENTS’ FORUM A voluntary organisation set up to help prospective and existing patients of private healthcare make the best choices and get the best service from insurers, hospitals and doctors alike has been launched. The Private Patients’ Forum (PPF) exists to encourage the growth and spread of the full range of private healthcare services. It has an Advisory Council of people who are actively interested in the growing success of private healthcare. The PPF is supported by voluntary contributions from individuals and organisations connected with the sector. More details at: www. privatepatientsforum.org


DENTAL DELAYS DUE TO COST Dental health is important to British people but they are concerned over costs. New research shows 93% of people rate their dental health as important, yet nearly one in three have had to cancel or delay dental treatment due to cost, according to CIGNA HealthCare Benefits. Of those surveyed by CIGNA only 5% had an employer paid dental plan. But more than half of respondents said they were willing to pay £10 or more per month towards maintaining their dental health.


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