Risk Commissions Will Vary Under LIF

Life insurers will pay advisers a range of commissionable premiums under the Life Insurance Framework (LIF) with only a minority opting to include policy fees and frequency loadings in the payments passed on to advisers.

Research conducted by Riskinfo, drawn from Adviser Guides and Remuneration Schedules made public to advisers, shows that while all of the major insurers will include the base premium rates in commissionable payments, only four will include policy fees and three will include frequency loadings (see: LIF By the Numbers).

The research also found that only one insurer will include stamp duty in its commissionable payments despite not being required to do so under the LIF legislation.

While the legislation has set the headline numbers around upfront and ongoing commissions at 80 per cent and 20 per cent respectively in the first year, level commissions were not set by the legislation and a third of life insurers have opted to decrease level commissions from pre-1 January 2018 levels.

The variance in commissionable premiums is an area of concern for the AFA, which has requested all life insurers include policy fees and frequency loadings under commissionable premiums from 2019 onwards.

Full details of the research are available in the Riskinfo March 2018 eMagazine.

  • Jeremy Wright

    When all these discussions were on the table, the Industry assured advisers that the commission reductions would not be too dramatic, WHY?

    Because, unlike the current ( 2 years ago ) system of a complicated commission system that was confusing, there was no consistency amongst the Insurers and advisers did not have the time to try and work out exactly what they actually would receive, we were all told the New system will be 80 percent, plus GST on the total premium.

    Like everything else that the Government and the Life Companies told us at the “consultation stage”.what we are promised, is always watered down and promises are like the wind. ( They change direction )

    The Government spokespeople AKA Kelly O’Dwyer and the other publicity seeking Public servants who were so keen to voice their authority, need to go back and listen to their own speeches, then start putting their promises into action, by forcing the Life Companies to act responsibly.

    Thanks Riskinfo for doing this work, we all appreciate you doing this important research.

    Another very important request, is if you could ask which Life Companies will guarantee not to rise their premiums above age and indexation increases in the first 2 years of a policy completing,would be great.

    Some Life Companies are doing this and should be recognised, as this will help advisers from being exposed to unacceptable risk and writebacks if a Life Company increases premiums within 2 years.

    • Squeaky_1

      Life companies DISGUST me these days, ever since I watched and saw NOTHING in terms of fighting for the advisers on the 2 year clawback issue. Jeez, they WANTED this destructive thing to come to pass. They welcomed it privately. They pushed for it clandestinely. This, even more than lower commissions, was the nail in the coffin for me with any respect for life companies and their two-faced executives.
      They would preach to us at PD days how they were “passionately committed to the adviser distribution channel” and other such corporate dribble-speak. These execs seem enamoured with this word “passionate” – seems to be the buzz word at life coys these days. I didn’t see any of this “passion” when we needed support from them for the 2 yr provision OR commissions being lowered. They COULD have helped and they COULD have made a difference. I know this as fact. They had more say in this, much more, than they let on. They DESERTED advisers, don’t let anyone tell you different.
      These days, unless I am specifically requested or see a compelling need, I am VERY reticent to give them any more new business under this terrifying 2 year clawback provision. It is totally unacceptable in my view and should be removed. 1 year was bad enough. Yes, I know how this sounds but it is how I feel – I do not want to write any new business with this thing in place. I am in the fortunate position financially of not needing to write new business BUT I will service my clients to their best interests always. I would be less than honest if I said anything other than I am very careful about writing new business and on whom I write it if at all.
      I am abjectly disgusted with life company behaviour on this and many other adviser support issues. they are only ‘good-time friends’, cannot be trusted and say whatever is necessary for short term results. 2024 is looking like a relief on the horizon at this stage – I’ll be free of this malaise forever. Maybe earlier, I’ll see.

      • Where’s The Integrity?

        I haven’t been around as long as you Squeaky_1 but I agree 100% with you on this.

        This extra 12-month responsibility period has obviously come as a result of the small percentage of churning advisers – who the life insurance company exec’s used to stand up at corporate and industry events and rant that they all knew about (and that we were apparently expected to all know of too). Funny thing is, I NEVER knew who ‘they were’. If I had have, I would have immediately confronted them in a very physical manner because what they were doing, and have now done, has partly screwed it up for us honest advisers.

        Where else in the world, in ANY other industry, does a 2-year responsibility period exist??? It’s just not right.

        But instead of simply identifying, name and shaming and then black-banning that small minority of advisers, they chose to continue accepting the new business because it lead to THEIR financial rewards and incentives. How conflicted! Then, of course when the new business works out the door 12-months later, its the fault of ALL advisers – which is just shameful and incredibly hypocritical.

        This 2-year responsibility should never have happened – its the insurance company’s fault it has.

  • Where’s The Integrity?

    Nice summary Jeremy. Pretty much covers everything that the rest of advisers are thinking now. We’ve been absolutely shafted because of the actions of a small minority.

    Thankfully, we don’t have a minority of politicians out there doing the wrong thing by voters and tax payers though. Oh hang on a minute…..???? #PotKettle

  • ken

    Dare I say it { again} I will be extremely surprised if Commissions are available at all in 4 years.
    This whole “ploy” has been to oust IFA’s and make it look like everything possible was done to save them
    How far will this Royal Commission go ? Not far enough I think ? It should include a whole review of the LIF legislation who fought “tooth & nail” to get it established and the real reason it was instigated in the first place.
    Consumers best interest ? b#@*&t