Level commission for SMEs the way forward says PruHealth
PruHealth has moved all its SME business to a 10:10 commission basis in what it describes as a bid to stop churning through greater transparency and sustainability.
From April, all SME new business is being written on the basis of 10 per cent initial commission and 10 per cent at each renewal.
PruHealth says the current market focus on low new business premiums and high initial commissions is unsustainable and the industry needs to adapt in order to decrease churn and over-commoditising of the group PMI market.
The providers says the combination of claims costs, commission costs and operating costs, combined with strong market demand for lower premiums means the premiums being charged are outstripped, forcing up premiums, which in turn forces more companies to switch or reduce cover.
PruHealth says the new model will allow it to build longer-term sustainable relationships.
Brokers who sign up to the partnership scheme could be eligible for ’portfolio commission’. This offers the potential for a quarterly new business commission uplift of up to 20 per cent dependant on their portfolio retention, portfolio loss ratio and new business API.
Dave Priestly sales director at PruHealth says: “We are taking a partnership approach to SME commission and want to share greater rewards with those brokers who work in partnership with us to develop stable and sustainable portfolios. Client retention is as important for our long-term success as driving new business. We have chosen to apply level initial and renewal commission for SME business to move us towards a more sustainable future. However, firms who work in partnership with us to develop long-term, stable customer relationships could benefit from a new quarterly payment of ’portfolio commission’.
“We believe this approach will help foster stronger relationships with our intermediary partners and will also bring more security to customer relationships.”