New Zealand: Room for life insurers to move from commission system
Source: Asia Insurance Review | Jul 2016
There is scope for life insurers to move away from their commissions-based distribution models, suggested the The New Zealand Institute of Economic Research (NZIER).
In a report on the Kiwi life insurance market, commissioned by the insurer Sovereign, NZIER notes that the 14 main insurers covered in the study collectively spend NZ$431 million (US$292 million) a year on commission payments to brokers and advisers who sell their products. The commission payments are on average equivalent to 23% of insurers’ premium revenues, and make up just over half of their distribution costs.
“The level of these costs, combined with the lack of growth in the market, gives life insurance companies as a group a strong incentive to identify and develop lower cost distribution channels.
“However the strength of this incentive will vary from company to company depending on differences in the cost of each company’s distribution model,” the report said.