Cigna Clarifies New Commission Options

0

Cigna released an update last week which includes a response to common questions raised by advisers around the insurer’s new commission structure.

The new structure was launched during last month’s Cigna Live event, which was attended by or streamed to around 1,200 advisers and other industry colleagues (see: Cigna Launches a ‘No Clawback Option).

Taking effect from 12 April, the updated commission structure introduced a number of new elements, including:

  1. Renewal commissions will now be paid from month two. Cigna argues the servicing of customers doesn’t start from month 13, but rather from the moment their policy is issued.
  2. Introduction of an ‘As earned’ option for advisers, which delivers commission payments over the first two years of the policy, instead of upfront. Under this option, no clawbacks will apply if a policy was to lapse in the first two years.
  3. More commission discounting options

In reporting in his update “…a significant increase in quotes and new business” since the Cigna Live event in April, the insurer’s GM Distribution, David Haak, thanked advisers for their feedback and provided clarity on a number of frequently asked questions about the new commission structure, including:

You’re paying renewal commission from month two. Surely this could be clawed back?

Renewal commission that is paid from month two cannot be clawed back.

While we’ll claw back the upfront commission (or part thereof) in respect of a lapse or cancellation within the first two years, we will not claw back any renewal commission.

When can as earned commission be taken?

Our As earned commission can be taken on any of our spread or standard commission options with or without a discount option selected.

Why does the As earned commission calculation mention half of the commission rate ie 115% vs 230%?

As earned commission is calculated over the first two years of a policy’s premiums whereas upfront commission is based on the first year’s premium only.

Haak offered advisers a working scenario which demonstrate how the ‘As earned’ commission structure compares with normal upfront commission arrangements:

  • The annual premium on a new policy is $2,400. If the Standard Upfront Remuneration rate is 230%, then the As earned Rate will be 115%. For Standard Upfront Remuneration, the remuneration paid will be: $2,400 x 230% = $5,520, paid as one lump sum following policy issue.
  • For As earned Upfront Remuneration, the remuneration paid in year one will be: $2,400 x 115% = $2,760, year 1 If the policy anniversary increases the premium from $2,400 to $2,600, for example, then the year two remuneration paid will be $2,990. This means As earned will have paid $5,750 in upfront remuneration at the end of year two.

Advisers can click here to access the change summary document released by Cigna at the Cigna Live event in April, at which key initiatives in addition to the new commission structure, included:

  • An update to Cigna’s online Adviser Hub
  • Enhancements to the eApp process including avoidance of data double-entry
  • Speedier, more efficient underwriting processes
  • Enhanced Specific Injury Cover