PPS Mutual – Profit-Share Assignment to Members


PPS Mutual has announced its latest round of profit share rates to eligible members for the 2020 financial year, with members to receive a Profit-Share assignment of seven percent of premiums.

The insurer says in a statement that this is the fourth consecutive year of profit share allocations made since the launch of PPS Mutual’s Professionals Choice product in 2016, noting that the rates determine how PPS Mutual members share in the profits of the insurance they buy.

As well as the seven percent of premiums, members of the mutual company have been assigned a further Profit-Share of 4.5 per cent of opening balances (net of tax), which the company says provides strong portfolio growth in this low interest rate environment. Opening balances are the account balances built up from previous profit share assignments.

Michael Pillemer…we’re free to share profits back to the members who buy our insurance policies…

The company notes this assignment follows the seven percent of premiums plus four percent of opening balances for the 2019 financial year.

PPS Mutual Chief Executive, Michael Pillemer  says the the insurer will continue making Profit-Share assignments each year “…to reflect the operational performance of the Benefit Fund including investment returns”.

He adds that PPS Mutual is the only life insurance provider in Australia which currently offers life insurance products with a Profit-Share.

“As a mutual, we do not have shareholders, we are owned by the lives insured, and this means that we’re free to share profits back to the members who buy our insurance policies.”

…one adviser group has clients who have received Profit-Share assignments of more than $200,000 in 2020…

He also notes that one adviser group has clients who have received Profit-Share assignments of more than $200,000 in 2020 and has clients with balances totalling more than $380,000.

David Davidson, Managing Partner of Melbourne-based risk advisory firm Priority Life, says in the statement that the Profit-Share brings something different to the conversation with existing and prospective professional clients.

“Now with Profit-Share Accounts reaching over $380,000, our clients are gaining additional value from their insurance. The discussion with prospective clients around the benefits of professional insurance contracts that also provides a profit share has become a much more engaging conversation,” he says.

PPS Mutual says its members are required to retain their policies for 10 years to gain partial access to the Profit-Share funds. Full access is granted after 20 years or upon reaching age 65, and also on death, terminal illness, and certain other events.

Pillemer told Riskinfo the company’s lapse rate is four percent, with about half this comprising members reducing their level of cover. He says this cuts to the heart of mutuality and profit sharing, and compares with an industry lapse rate of about 15 percent.

He says the profit share is a tangible manifestation of the alignment of interests with members also being the owners of the insurance company. He also points to another benefit being the build up of client loyalty as long as they, and their adviser, feel the cover is as good as they would get elsewhere.

… looking to expand the number of advisers it uses on a selective basis…

PPS Mutual only deals through advisers and Pillemer says in the last four years they been growing adviser numbers each year.

It is looking to expand the number of advisers it uses on a selective basis and has recently appointed BDMs in Queensland and NSW and will soon appoint a BDM in Victoria.

He says advisers are under a lot of pressure currently, with regulatory reform, premium increases and Covid-19, and he is a big advocate for a strong, sustainable advice-led sector.

‘What excites me is that we really do feel the PPS Mutual model and profit sharing can be hugely beneficial for advisers as it enables them to build more profitable, viable businesses and they are more likely to retain clients.”

He says when clients start building up their profit share they are a lot happier and feedback from advisers says they get more referrals through these happy clients. He adds that this higher retention of clients means advisers are building up the long-term value of their book.