Restrict Commissions or Target Churners?

5
Which approach towards life insurance commissions better serves the long-term public interest?
  • The New Zealand Government's (87%)
  • The Australian Government's (8%)
  • Neither (3%)
  • Not sure (2%)

Our latest poll asks you to consider the differing approaches towards the future of life insurance commissions taken by governments of Australia and New Zealand.

Recent recommendations by the New Zealand Government have delivered a contrasting approach towards risk commissions within the context of serving the best interests of the community (see: Risk Commissions in NZ to Stay).

The Australian Government’s approach could be described as more prescriptive compared with that taken across the Tasman.

Distilling the respective positions to ‘sound bite’ statements only serves to simplify a sometimes complex debate. But for the purpose of summarising the two approaches, we offer this:

Australian Government Approach

Remuneration by commission represents an inherent conflict of interest that does not serve the best interests of the consumer. The Australian Government is seeking to restrict (not ban) commissions in order to strike a balance between serving the long-term interests of the consumer and accommodating the difficult challenge faced by risk focused advisers in serving their clients while building a viable business. The proposed Life Insurance Framework reforms are intended to align the interests of all stakeholders: insurers, advisers and the consumer.

New Zealand Government Approach

Banning commissions (or by implication, restricting commissions) is not a ‘silver bullet’ that will improve the quality of advice because:

  • Commissions are not themselves harmful
  • A ban on commissions would not directly target poor conduct
  • It would not address conflicts of interest where financial products are sold through in-house distribution channels

Another way of distinguishing between the two approaches could be to summarise the Australian Government’s approach as one that targets the means of conflicted interests while that of New Zealand targets instead those who abuse the privilege of being remunerated by commission (see: New Zealand Regulator Claims Churn a Minor Problem).

Noting in closing that we’re asking you this question within the context of what is in the long-term interests of the consumer, we’ll hand the conversation over to you. As always, we welcome and value your comments that focus on the issues and advance the debate…



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5 COMMENTS

  1. Across the Tasman they seem to be enlightened. But just as an iceberg is unseen below the surface there is much murkiness below the surface in our industry here. It’s likely we’re being fed anything but the truth as to why government intervention has been deemed necessary from LIF’s beginning.

  2. Those of us who have been involved in the industry know why commissions work well in risk insurance I am not going to go over it all again
    New Zealand is more than aware hence their recent decision to maintain them and at a deserving rate to civer the work required by the mountains of legislation piled on us over a number of years
    Every member of parliament needs a copy of their investigation but particularly treasury
    I have no doubt the LICG has this by now and will use it to show up the massive inefficiencies of the AFA FPA and downright nasty misconceptions they have supported from the FSC
    Maybe ? Just maybe ? some justice may come along to support us for s Change

  3. 1: Target Minority Churners – A job for the Life companies and Compliance departments of Licensees

    2: Better regulate Direct Insurance

    There is no other worthwhile discussion here that benefits clients

    NOTE NZ: https://riskinfo.com.au/news/2016/07/18/risk-commissions-in-nz-to-stay/?utm_medium=email&utm_campaign=riskinfo%20email%20685%20160720&utm_content=riskinfo%20email%20685%20160720+CID_2cb45308e9ea00db94945ff4d4e743d1&utm_source=Email%20Tracking&utm_term=Risk%20Commissions%20in%20NZ%20to%20Stay

    Thanks

  4. We have laws in place currently to protect the best interest of the client. We also have insurers and dealer groups who are fully aware of who the curners are. Actually very easy for Australia to adopt the New Zealand approach which is the only one that will protect and benefit the client which this ahould be all about.
    There is no client benefit from the Australian approach.

  5. I am confident that the LICG will bring to the attention of the government (and hope the government will listen and understand like the kiwis did) as the FSC have been trying to railroad LIF through without the voice of what the majority of risk advisers have been saying.
    I like many of my adviser colleagues are still members of both the AFA and the FPA but feel they have not represented the majority views nor have they asked.
    The LICG have to date been reflective of the majority view and have been doing a great job in a short space of time so thanks to those that have been involved to date. If the LICG needs any money to help fund the cause worth fighting for I am sure many of us would be willing to hand over some hard earned.

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