Latest Poll – Life Insurance Framework Update

Year two of the Life Insurance Framework transition period (2019) will have a greater impact on my advice business than has year one (2018)

  • Agree (82%)
  • Disagree (11%)
  • Not sure (7%)

As the life insurance industry forges head-long into uncharted territory next year, we’d like to know where you stand after twelve months into the three-year Life Insurance Framework reform transition period.

Is your advice business adjusting to what, for many (but not all), has been a lower upfront commission environment this year? To what extent will the legislated reduction in commissions from 80/20 in 2018 to 70/20 in 2019 have an impact on the bottom line of your advice business profitability? What changes, if any, have you made, or will you be making?

Perhaps the ‘kicker’ for many advisers and advice businesses in 2019 may be the impact of the 100 percent commission claw-back…

Perhaps the ‘kicker’ for many advisers and advice businesses in 2019 may not be the further-reduced hybrid commission level but rather the impact of the 100 percent commission claw-back for any risk business cancelled inside one year.

…And perhaps many advice businesses (risk-focused or otherwise) may not really be able to get a true sense of their future viability until sometime in 2021, after the end of the tree-year transition period delivers a 60/20 commission structure from 1 January 2020, and the full impact of the two-year claw-back period has been experienced.

We appreciate there exists the spectre of further reforms, which may stem from the recommendations that will be handed down early next year by Commissioner Hayne, following the completion of the Financial Services Royal Commission hearings. But assuming the status quo for the time being, do you think that 2019 will prove more difficult for you and your businesses as a result of the move into year two of the Life Insurance Framework reforms?

Tell us what you think and we’ll report back to you soon…

  • Jeremy Wright

    There are some Life Companies that have clarified their exact position on how the 2
    year claw back works and it is not good news.

    Luckily, some Life Companies are trying to do the right thing.

    Let me explain.

    We asked every Life Company to clearly clarify their position and what percentage claw back would occur based on the following;

    Question One. Client pays either, 12 monthly premiums or One Annual premium and does not renew the policy.

    Answer. Some Companies said the adviser would be hit with a 100% claw back.

    Other Companies said the adviser would be hit with a 60% claw back.

    Question Two. Client pays either 24 monthly premiums or 2 annual premiums and does not renew the policy.

    Answer. Some Companies said the adviser would be hit with a 60% claw back.

    Other Companies said the adviser would be hit with a 0% claw back.

    The implications for advisers Businesses is obvious.

    In effect, an annual premium paying client, would have to pay 3 annual premiums in
    order for there to be a nil claw back.

    The Life Insurance Industry needs to wake up, or be forced to start doing the right
    thing, as many of them do not appear to understand the implications of what
    they have done and that their short term profit grab, will backfire.

    The retail Life Insurance Industry will effectively cease to exist, thousands of Life
    Company managers, staff, advisers and their staff will be out of the Business when the full impact of LIF hits and millions of Australians will be worse off, for a LIF fiasco that so easily could have been avoided if the Life Companies, via their mouth piece the FSC, told the full truth from day one, instead of their version, which was clearly wrong.

    Every Adviser practice in this country deserves to know if the Life Insurance Company they are looking at to recommend, is doing the lower claw back, or are they hitting the
    advisers with a more punitive claw back and if so, then the advisers can decide
    which Life Companies they will work with.

    Best Interest Duty can only apply if Advisers can stay in Business and make a profit.

    • Katherine Hayes

      Would you care to share which companies are taking which stance?

    • Jeremy Wright

      Hi Katherine,
      I am hoping that the Life Companies that are taking a more punitive stance, may rethink what they are doing and change to the fairer option.

      I am willing to give them until mid January, then we will contact each of them and suggest they need to take this seriously or we may be forced to tell every adviser which Companies are being fair and whoever is not mentioned, will fall into the other category.

  • The Patriot

    shows just how silly this whole situation is. Commission is not a bad thing…if every life company had the same rules/polices around it so there was no bias at all, then LIF would not need to be present. Some *#@! thought that commission is always bad and lobbied for legislative change – thankyou FPA and others. Now the life companies are looking after themselves and premiums have risen! quite the opposite of the intent, I am sure. It is clear that powerful forces do not want advisers around… certainly not those that are not linked to any big business. Vote accordingly at the next election and be aware of preference flow….Labor are no different here… perhaps more aggressive. People Power.

    • Concerned

      Following on from my comments in a previous article – let’s hope the insurers are seeing this statistic. Things will only get worse if they do not collectively go the govt and have this LIF legislation amended.