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Life, Commission, Calculate Button & Set-up Calculator

On the Life “Commission” screen, as shown below, you can either enter your commission details manually (see “Life, Commission”) by copying them from your quote, or use the “Calculate” button to calculate them automatically.

The problem with the “Calculate” button is that it will only produce the correct figures if its underlying rates are kept up to date, which has to be done by the brokerage, rather than Durell, as each brokerage will be offered different rates by the various insurers. The following notes explain both how to use the button and also how to keep the figures up to date.

However there should actually be no need to use the “Calculate” button, because IFAs are required to know the potential commission of each case at the time of getting the quote from the assurance company, in order to disclose it to the client, so if you don’t want the bother of maintaining the underlying rates you can choose to totally ignore this button altogether, and simply copy the figures from your quote. 

Having clicked the “Calculate” button you’ll see a screen like that above, where…

  • The top “Policy” box simply re-displays “given” information about the policy, namely…
  • o The policy’s start and end dates

    o The policy’s term in months

    o The client’s age next birthday

    o Whether there is an age limit on the collection of premiums for this type of policy (e.g. often set to age 85 for whole of life policies)

    o The “Effective premium term” in months, which will be the same as the policy’s term, unless reduced by an age limit

    o The start and end dates for the collection of premiums, based on the “Effective premium term” (i.e. not necessarily based on the policy’s term)

  • The “Initial commission” box, which includes both “given” information (in flat 2D fields) and editable data (in indented 3D ones), contains…
  • o The premium per period, as previously entered

    o The “Commission rate” for this type of policy incremented by the insurer’s “uplift” (e.g. 35% normally for Life Term policies, but uplifted to 140% of 35% = 49% as shown)

    o The “Monthly commission” due in the initial period (e.g. £49.21 x 49% = £24.11)

    o The duration of the “Initial” period, displayed in months (e.g. 48 months), derived from the system’s “Life Commission Rates” as shown below

    o The total amount of “initial commission”, based on the monthly amount multiplied by the number of initial months (e.g. £24.11 for 48 months = £1,157.28)

    o The “based on rate” field simply shows which “Life Commission Rates” record was used (e.g. in this case the generic one for all Life Term business)

    o The “uplift” field again simply shows what uplift was used to calculate the “% Commission rate”

  • The “Indemnity term” box shows…
  • o Whether or not you have chosen to receive all the initial commission up-front (i.e. “Indemnified”) or to take it in instalments as and when received by the insurer (i.e. “Non-indemnified”)

    o At what rate the up-front “Indemnified” commission is to be reduced (e.g. at 1% per month per month, so that the sums received furthest in advance are the most reduced)

    o The total amount of the reduced “Indemnified” commission (e.g. Indemnified = £924.71, whereas the non-indemnified would have accrued to £1,157.28)

    o NB the “Indemnity sum” will only calculate or re-calculate when you click the “=” button beside this field

  • The “Renewal commission” box shows…
  • o The renewal commission rate (e.g. 2.5% of the premium)

    o The renewal commission’s start month and duration (e.g. after 48 months and then for a total of 192 months)

    o The amount of renewal commission per period (e.g. £1.23 per month)

    Adjusting Parameters

    You can adjust any of the parameters in the indented 3D fields and then re-calculate the commission by clicking the “=” button next to the “Indemnity sum” field…

    o Change the “% Commission rate” as required for the different types of product (e.g. pensions typically = 25%, term = 35%, etc)

    o Change the “Uplift” rate as applicable to your brokerage (e.g. to 140% of Lautro, which will then automatically increase the “% Commission rate” accordingly)

    o Change the number of “Initial” months, as required, during which the higher commission rate applies (n.b. typically based on the type of, and the term of, the policy)

    o Change the “Indemnity rate”, as required (e.g. typically 1.0% per month per month, but now also often 0.75%)

    o Change the renewal commission rate, as required (e.g. typically 2.5% of the premium)

    o Click the “=” button next to the “Indemnity sum” to re-calculate totals

    Set-up Correct Parameters In Advance

    Instead of adjusting the parameters as described above, you can set them up in advance to correctly reflect the rates you have agreed with your insurers, as shown below. You can get to this set-up screen by two routes…

  • EITHER, starting from Durell’s Main Menu…
  • o Click the “Setup” button

    o Double-click the word “Products” at the bottom right of the selection list on the Setup screen

    o Click the “Signpost” button and select “Setup commission calculator”)

  • OR, starting from the Life Commission screen…
  • o Click the “Signpost” button and select “Setup commission calculator” to get to the “Products” screen

    o Click the “Signpost” button again and select “Setup commission calculator” a second time

    On the “Life Commission Rates” screen first use the search buttons to check through your existing rates. You can create a new rate via the “Starburst” button, or via the Signpost button’s “Copy” option, and can delete incorrect ones via the “Bin”. To edit an existing rate, first use the search button to find the rate applicable to the product in question, where...

    o The first four characters of this code indicate the insurer, and “????” means any or all insurers

    o The 5th & 6th characters (e.g. LT) indicate the main type of product (e.g. Life Term, all sorts of)

    o The 7th – 10th characters indicate a particular sub-type of the product (e.g. Life Term, Level), while an “*” means any or all sub-types

    o The final four characters indicate a specific product, or plan, where again the “*” means any plan

    So, for example, the product code ????LT* shown above, applies to all Life Term business, from all insurers, whereas a code like PRUDLTLEVEFIVE might apply to just the Prudential, Life, Term Level, Five Year Plan (e.g. like that shown below). Typically you will only need one rate per product type (e.g. just for all Life Term products) as the main variable per insurer is the “Lautro Uplift”, which is setup elsewhere, as shown below, either globally (i.e. for all of that insurer’s products) on the “Setup Insurers (Life)” screen, or specifically to each product on the “Setup Products” screen…

    So, in the case of a commission calculation for a Life Term product, the system will search for a rate with the closest matching Product code, and then get the Lautro uplift from the insurer’s record. The insurer’s uplift rate (e.g. 130%, as shown above) will only be over-ridden by a specific product rate (e.g. 117%, as shown above) if a tick is put in the product’s field “Don’t update rate from insurer”. Hence when an insurer agrees to give your brokerage an overall new rate of, say, 145%, you only need to enter this once on that insurer’s record.

    All the other parameters for the commission calculation are taken from the Commission Rates record, like that shown below, where…

    o The “Single premium rate” (e.g. 5.0000%) is used if the policy in question has a “Single” premium payment (e.g. to purchase a unit trust)

    o The “Regular premium initial rate” (e.g. 25.0000%) is used for the “Initial commission, % Commission rate” for all regular premium policies (e.g. paying monthly), but will also be increased by the Lautro uplift rate

    o The “Regular premium renewal rate” (e.g. 2.5000%) is used for the “Renewal commission, Renewal com %” for all regular premium policies (e.g. paying monthly)

    o The “Commission age limit, or EPT” (e.g. 85) is used to impose an effective premium term, or end date, at a given age (e.g. 85th birthday), if applicable

    o The “Commission years limit” similarly limits the maximum number of years to pay commission for open-ended contracts

    o The “Calculation method” must be set to “1”, which follows the Lautro method. Other methods may become available in future.

    o The “Indemnity discount rate” (e.g. 1.0100) is the coefficient by which the indemnified commission is reduced per month per month, which must have a 1 in front, so [times 1.010] gives a discount rate of [1.00 %]

    o Use the “Years term re coefficient 1 to 3” and “Initial months x coefficient” to calculate the number of initial months to pat commission at the higher initial rate, as follows…

    § For the first 15 years of the policy’s term you get 15 x 1.60 initial months (= 24 initial months)

    § For the next 10 years of the policy’s term you get 10 x 1.40 initial months (= 14 initial months)

    § For the remaining years of the policy’s term (e.g. let’s say 5 more years) you get remaining years x 0.50 initial months (= 2.5 initial months)

    § Which results in a total of 40.50 initial months

    o Use the “Max initial months” to restrict the total number of initial months to this figure (e.g. not more than 48 initial months)

    o The remaining fields may be ignored as they are for alternative commission calculation methods, which are not currently supported