Commission Crunch Will Continue Into Future

Life insurance commissions will never return to pre-Life Insurance Framework reform levels and are likely to be reduced further under continuing reforms, according to the former Shadow Minister for Financial Services, Bernie Ripoll.

Shadow Minister for Financial Services, Bernie Ripoll

Speaking at the recent FSC Life Insurance Conference, Ripoll, responding to a question about what actions the life insurance sector should take to avoid further regulation, said “I can’t imagine any circumstances where things will go backwards to how commissions were treated, or where we will stay where they currently are”.

He added that “where are now is a soft landing for what was actually intended and a future government of any colour will continue the process”.

“Commissions as form of payment are in the past but we should not dwell on it for so long that we are not focusing on remodelling businesses and doing good things with insurance,” Ripoll said.

“I can’t imagine any circumstances where things will go backwards to how commissions were treated…”

According to Ripoll, the impetus for further change will be driven by more revelations of poor practices, despite statements that many of these no longer take place.

“There have been a series of reforms and reviews, and this tells us there are some issues in financial services and life insurance, and we can’t get away from that,” Ripoll said.

“Yet, we continue to be surprised by ongoing issues, even when we have been told these were past or historical issues,” he added, pointing to the recent Banking Royal Commission.

“So, there will be more reviews because trust is at its lowest in many industry sectors, but financial services is very low on all the trust barometers,” he said.

Ripoll said the life insurance sector does not exist to provide profit for self but exists to provide services to consumers and that if participants did not look at  reform through that lens “…in three years there will be either same or more reform, but it will not be wound back”.

  • paulkate72

    It’s interesting that Bernie Ripoll states “commissions…are in the past”. Is this only in the life-risk industry? Is it in the general insurance industry? Is it in the real estate industry and importantly, is it so in the stockbroking (they call it “brokerage”) business? If so, this is a dismantling of many longtime industries with seemingly so little gain. If actions are to be taken there has to be a significant benefit to all stakeholders. I simply can’t see one here.

  • Fed Up Advser

    Yet another outsider, who’s only ever worked under a PAYG model, who DOES NOT understand what he’s talking about nor how his decisions impact consumers, hell bent on dismantling what was once a great industry where I proudly provided honourable service to people in.

    But, it’s bloody obvious no-one cares what we advisers think about what’s happening to it. Politicians and other I’ll advised geniuses seem free as a bird to do whatever they want to us now and we just have to sit here and cop it.

    Where else – in any industry, is this allowed? It’s just wrong.

    Whether they want it admit or not, the vast but majority of consumers do not want to pay additional advice fees for life insurance.

  • test

    What a pity. Quite literally the only reason i won’t vote for the ALP.

    Yet another ‘leader’ jumping on the anti commission bandwagon without any empirical evidence to backup their claims. This has played out so many times in so many countries around the world and the facts are simple – removing commissions will not provide a better outcome for consumers. Less consumers will have access to advice and will be encouraged to buy direct from the insurer. But hey, I am sure our lucky country will be an exception to the tried and tested rule.

  • Paul

    Shock Horror……. commissions are going lower. This has been the end game all along. To rid the industry of risk advisers. consumers to be protected by direct and super. I wish they would just come out and say it. This whole review process dating back many years has occurred for one reason and that is the insurance company were losing money…. step in ASIC and FSC. Also interesting is the comment that ‘the life insurance sector does not exist to provide profit for self but exists to provide services to consumers’ I am quite sure insurance companies are in it for the profit. also quite interesting is the continued silence of the AFA and FPA but the FSC made sure of that. I have lost all faith in the industry and lost all faith in the government, what little faith I had in them. Time for a career change.

    • Alan

      Yes well said Paul, either retire if you are anywhere near that with enough super or definitely re train for a career change. It is simply not viable to remain in risk or super with incomes coming down and costs only going up rapidly.

      • Had enough!

        Agree Alan. We are hearing it over and over – i.e. advisers are looking to get out as it is just not worth it anymore!

  • Jeremy Wright

    Ripoll said the Life Insurance sector does NOT exist to provide profit for self.

    That comment alone suggests he never had the plot, let alone lost it.

    Every entity, ( apart from Government who are incapable of doing anything in a cost effective and profitable manner ) must pay it’s way and have sufficient reserves and profit to continue what they are doing.

    Bernie Ripoll has shown he has NIL credibility and our associations need to grow some B—s and confront all stupid comments, or suggestions, or regulations, no matter who or what entity it comes from that is detrimental to the Life Insurance Industry and all Australians.

    If you let bullies or self interest groups control the agenda, you lose.

    • Alan

      Ripoll hasn’t got a damn clue and neither has anyone else in politics basically but if Labour get in at the next election, it’s good night to you all.
      It will be a disaster. See my comments below that apply.

  • Rob

    So Bernie Ripoll, more revelations of adviser wrong doings forthcoming. What makes you believe this. Show me the proof. Or are you basing this on the 50 advisers that were found to be active churners across all of Australia. We will hold you to this. The royal commission (labor advocated) will expose any poor or illegal practices from risk advisers. Lets see what its findings are. This will ultimately prove you wrong.

    • Really?

      Don’t bet on that Rob. The data they report won’t be pure. It’ll be manipulated just like it was with Report 413. Handpicked and manipulated with little regard given to the truth when its proven to be wrong.

  • Old Risky

    Mr Ripoll is like all politicians – he tailors his comments to suit his audience. He used to attend AFA conferences and tell the then AFA Board what he thought they wanted to hear.

    Bernie’s hosts, the FSC, of course want nil commissions because the brains of the FSC think that life insurers can operate in the future, without advisers, by selling direct. Read the PJC report. It’s very
    clear that the heavies see the future as being one powered by direct sales.

    And why wouldn’t they. No underwriting, premiums identical to retail, very little policy establishment costs and , wonders of wonders, while 45% of the new direct policies have lapsed by 12 months later , the profits
    already been taken . No need to wait 7 years to recover costs.
    AND Fat chance of paying a claim with half the risk falling off the books after a year.

    Better still the direct floggers have apparently convinced the PJC that they have a very high claims satisfaction rate, as a percentage of policies written. What a surprise ! What a distortion !

    Someone ought to tell Bernie that any Number 1 Statutory Fund, full of non-underwritten life risks, is not a long term prospect. Bernie should realize that if the big insurers, currently walking both side of the street soothing
    the adviser audience, while gearing up to sell heaps of non-underwritten direct and group risk, might just eventually have a problem with capital adequacy and solvency of their # 1 Fund, if it contains too much non-underwritten risk. But that would require APRA to be on the ball, something they haven’t done in the past. Bernie should also ponder as to whether his mates at industry super will still have access to cheap default group life cover.

    So Bernie’s new world, with few remaining self-employed advisers, would look like this: the non-super client, unable or unwilling to pay the necessary fee to get competent advice on life risk, responds to glib television advertising and buys their life insurance with just one convenient call , obtaining a policy resplendent with crap definitions, on a nil underwriting basis from a direct flogger, with claims restrained by a five year pre-existing condition exclusion.

    Emperors and clothes stuff !! Sounds like a welfare budget blow-out to me !

  • Where’s The Integrity?

    Howcan these outsiders, with no risk insurance advice experience, who have never sat in front of client and worked through the process that we do each day (well I used before I became glued to my desk ticking off checklists to satisfy someone else’s job), be allowed to just continue throwing stones at our industry every single day???


    Imagine if we went into ASIC’s, Rippoll’s or Trowbridge’s office and criticised and undermined everything they do every day!!

    ASIC exist for one reason and one reason only – to find fault. Their very existence depends on it. If that’s not conflicted, I don’t know what is.

    Politicians should also abide by the same code of ethics and take up the same level of education that they now expect us to. Their uneducated, ill-informed decisions affect tens of thousands, even hundreds of thousands of people.

  • emkay

    Ripoll said life companies not in it for profit? So according to him they should just provide service and not profit??? What parallel universe does this idiot live in? Proof again the “experts” are simply paid mouth pieces for FSC and unions whose sole plan is to rid the industry of competition.

  • Ken

    We all know what’s coming if we don’t make a stand on this
    Isn’t it about time we petitioned the AFA and FPA to do the job we pay them for.
    They are very good at putting on roadshows handing out awards to people for just doing what’s expected of them in this industry and telling us they are here for us ???
    If this was happening in the building trade the Unions would be staging protests in George st thousands strong
    When oh when will they really get on board and work for us
    I’m completely disillusioned with both of them

    • Where’s The Integrity?

      I agree Ken. I’ve had this crap to the back teeth now.

      I will be talking to the AFA and my Licensee about this, this week. The AFA get my money every month and I have no return on it as far as I’m concerned.

  • Phil

    Yes Mr Ripoll, we get rid of these ‘evil’ commissions & solve the gross underinsurance problem in Australia all in one go, eh! Sure, I can charge a fee for a client where the NET OF COMMISSION premium will be $10k. But how do I charge an initial AND ongoing fee for service to a client where the total premium they require to pay is [say] $2k net. Sure with that ‘evil’ commission component included the gross premium becomes a horrifying $2.5k. But this client has some health issues and only recently changed occupations. So it takes me 15 hours of my time from initial FSG to policy issue. My costs are $165 an hour [and yes, this includes a modest profit margin]. Thus I need to now charge him 15 x $165 = $2.4k PLUS he pays the NET OF COMMISSION premium of $2k. Sure, at 60% commission I still can’t come close to recovering my costs – but at least the client has paid a total of $2.5k in premium cost only AS OPPOSED to $4.4k total cost [net premium plus my fee]. Of course, we in the real world know this client will never pay the $4.4k amount!!! As ‘Where’s the integrity’ basically said – these people don’t live in our world. They get their fat pay check each month whether their performance is good, bad or indifferent.

  • Where’s The Integrity?

    Hey Bernie – why don’t you come clean to us all about the ENORMOUS FEES all your mates working in the industry superfunds charge members when one of them finally realises they need to seek out some personal advice after they’ve finally realised the rubbish default cover their superfund provides them is both inadequate and diminishing as they get older? I hear fees of $5,000 aren’t uncommon!

    Conflict, double standards and greed is all that’s motivating this relentless barrage against us risk insurance advisers.

    Anyone would think the life insurance market here in Australia was saturated the way this industry is being undermined!!!

  • Fedup

    These overpaid public servants really need a dose of reality. The problem is that they have spent their entire careers leeching money from the public purse. Why doesn’t he cone clean on his motives.
    I’m sick to death of being tarnished with such a negative brush.
    What do they want? Destroy an industry?

    • Squeaky_1

      ‘Fedup’ yes, you took the words from my mouth. You know, the life insurance company execs will be reading this article and they want advisers gone too.
      The pollies have ignorance as their excuse for this lunacy but the life company execs have a darker side, one driven by the shortest-term profit motive I’ve ever been able to identify. They think that ridding ‘their’ industry of these nuisance advisers who insist on these pesky and expensive commissions will send their profitability to new heights. RoboAdvice will fix absolutely everything, they believe. No commissions and minimal upkeep on computer systems they already have! What’s not to love about that ‘adviser-free’ setup? Ha! Perfect for them . . . or so they believe.
      The sad truth is they are wrong (as WE all know) but they are going to decimate this industry by having to prove it to themselves. Once WE are gone it will be too late for them, then Burnie Ripoll’s ‘imagination’ of things not going back to the past will really be all too true sadly.
      As usual, the clients will be the biggest losers, thanks to life company greed and politician cluelessness and their need to be elected next.
      Today’s good young advisers will be OUT or re-deployed as life company desk advisers, earning a fraction of their potential. We ‘older’ advisers will be happy in our retirement, with some sad memories of what ‘may’ have been given a ‘proper’ stewardship of our once spectacular industry. The current so-called leadership entities have already left the house, with the likes of ASIC, FPA, life execs, special interest groups – all self absorbed.
      All of the above is predicated on the FACT that we cannot charge clients for pure risk advice, contrary to what the various commentators may bleat. Trouble is, the pollies are listening and believing these harmful but clueless commentators and that isn’t helping endorse the commission mission! Life insurance is a unique product. It has ALWAYS had to be SOLD and will always HAVE TO BE SOLD. A struggling family – who needs it most – will never put a hand in a pocket to pay THOUSANDS (on top of required premiums!!) for someone to help them plan and execute appropriate protection for the family they love.
      Would be lovely to think some politicians and life company execs read these comments, get educated to the real world and change course before it is too late. Here’s hoping . . .

  • Squeaky_1

    Well, at least one thing positive looks to be coming from this ongoing malaise in which we advisers find ourselves: a good client book of pure risk clients will be of even higher value in the face of reducing commissions. “WHAT?” I hear you say, well,. . .think about it . . . what better way for a young adviser (or even between ages 40 – 50) to ensure their income remains consistent and high enough to be worthwhile by having a guaranteed, grandfathered CPI adjusted ‘always there’ income stream complementing a ‘lower’ upfront commission payment system.
    Actually, forget upfronts. Think hybrid OR LEVEL! With a good grandfathered commission book supplying a reliable high consistent income, there’s no real need to rely on upfronts at all! Enjoy the level commission and the ongoing 30% or so as your renewals will pay the shortfall. Perfect.
    If I wasn’t excluded from our future industry by these idiot irrelevant exams coming up I’d be buying risk client books with both hands, as I’ve done in the past with great success. I know what I’m talking about with buying registers. I’ve done it 4 times now and they are the greatest investment in the world and will be even more so now thanks to lowering of commissions. Depending on what stage you’re currently at, think seriously about buying a good risk book. If it is a good one then there is no doubt you’ll be making one of the best decisions of your career. Hand on heart, I have found this to be true.
    Talk to your bank about a wonderful facility called a ‘cash-flow loan’. Some of them have it and you won’t have to put up much (if any) cash upfront OR put your home on the line. They use the value of the renewals as full security! A few of the big four have this loan but I shouldn’t mention names here. Shop around as big differences in terms. If you qualify AND find a good client base to buy AND do NOT go ahead and buy it you have rocks in your head. A few extra client books bolstering your income as they reduce commissions is a Golden Gift to advisers who are switched on enough to make sure it happens. Best golden handshake this ‘once great’ industry will ever give you!

  • Jake

    So Bernie, i have a few questions.

    When there are no Insurance Advisers left, how do you propose people get insurance advice? Online? Direct? Ask a friend? Ask their accountant? Call a call centre?

    Who will sell Life Insurance? It isn’t the most glamorous job and if you aren’t getting paid why would you include it in your services.

    Do you actually think that people will pay extra for insurance advice on its own?

    Do you think that people get the same insurance result when they set their policies up themselves through one of the scam direct insurance companies?

    Who is going to help clients with their insurance claims?

    Do you think it is fair that most people will have to give $20k or 30% of their TPD claim to a lawyer, just for that lawyer to settle out of court so that they can claim their fee?

    Do you work for Maurice Blackburn or Slater and Gordon or one of those other firms?

    MOST IMPORTANTLY, name one benefit which has come from decreasing the levels of commission paid to advisers, who are the only ones working in the client’s best interests. Just one…

    I would love an answer to these questions but im sure you do not have a satisfactory one backed up by experience or logic, especially as you are only half educated (as an electrician) and i am amazed that anyone ever takes your report seriously.

    How did we get a semi literate electrician and union thug writing reports which dictate the future of an industry?

  • Rob

    All this focus on risk commissions is so wrong and unwarranted. There is no justifications from our end for all this lunacy. I believe that the attention should be re diverted from our industry, and placed squarely on the legal profession who scavenge on the less fortunate to rip 30-50% commissions from super fund insurance claimants. We could get potentially paid a few thousand in commission, while these no win big fee money machines rip millions in commissions( or sorry fees) from the vulnerable and less well educated. They are experts only in filling in claim forms. They even have the audacity to portray themselves as the superannuation experts. Is this not false advertising? Of course talking to politicians about this will fall on deaf ears, because the ears belong to mostly solicitors. Perhaps the best way to fight back is to switch attention from our industry to theirs. I actively educate my clients about this anomaly, we should do more as an industry (AFA/FPA) to fight back.

  • TB

    You have to keep positive and ignore those in government that have no idea what they are talking about. There will be pain and suffering for both risk advisers and customers in the next few years because of people like Bernie who don’t understand what they do.
    Eventually reality will win just as it has in other countries.
    They first thing is insurers business will plummet. Every BDM I speak with is admitting that business is already down and this will get much worse for them.
    Secondly there will be a big issue for government with a huge rise in underinsurance. They will also have to deal with what they have caused in driving more customers direct. Fewer claims being paid, high lapse rates etc, etc.
    They will not admit they were wrong but others will come in to fix the issues they cause and insurers will eventually re-lobby to go back to adequate commissions paid when their business drys up from advisers and they are getting sued left right and center on their direct sales models (just as they have with super insurance) and government can’t afford the extra benefit claimants.

    • Paul

      I agree TB but please tell me who is going to be held accountable for this? and where is the AFA and FPA on this? we pay our association fees and what do we get? we get Silence…….

      • TB

        Unfortunately Paul it won’t be people like Bernie who will blame shift, it won’t be the FSC and company execs who are just after a quick short term profit and then retire. As with other countries it will be fixed quietly when it all hits the fan. Everyone will know who caused it but they will be unlikely to be held accountable. These people simply have no morals.

  • C.

    Bernie Ripoll is a complete waste of space and breath and is nothing more than one of the many parasites that aren’t in the industry but continually feed off the industry supported mostly based around his self promotion of how very important he once thought he was.