The Future For Risk Commissions

1. Close my business and go become a wage earner for a industry fund or bank. Maybe change careers and go dig holes at a mine or move to New Zealand and setup there.

2. This issue continues to rage because of bored souls in the media and industry bodies.

   The truth is that in the history of temporary insurance, there never has been a proven case of conflict. So what conflict are we trying to eliminate exactly?

   There is a rubbish idea that advisers churn into well paid products. With all insurers paying a hansom upfront brokerage and products looking remarkably similar…then I ask again, what conflict?

   This industry is not broken. It doesnt need extreme or radical change. Advice is not tax deductible, a lot of cover is not tax deductible and some cover even has a state duty. Why would a client want a hefty invoice after paying hefty premiums?

   The population is hard enough to insure via a web of product and whacky tax and superannuation estate issues without “industry confusion” to throw on the heap.

3. The intention of banning commissions on risk is to remove conflict of interest. Retaining commissions and removing conflicts of interest are not incompatible.

   Make commission rates from all insurers equal. Simple!

   I would also propose removing upfront commissions to encourage practices to maintain policies for the long term, and therefore increase the value of the practice.

4. In the UK risk commissions were banned only to be reinstated when it was realised how bad an idea it was.

5. Would the payment of bonuses related to the amount of risk insurance also be banned? Banning of commissions is a beatup by industry and media hype. The beneficiaries would be industry funds/unions/labour government surprise surprise. The public need to be aware of these conflicts of interest before any changes are made.

6. By banning commissions on insurance products would heavily impact on financial planning firms and probably lead to a large increase in adviser fees. For a client to have a personal insurance analysis performed and maintained by a professional through a commission structure secures Australia’s wealth and lifestyle. Commission do not appear to add cost to premiums when comparing average death, TPD or income protection insurance from large insurers to industry super funds (who apperantly don’t pay commissions). Give the people the choice to choose how to pay for their advice and leave commissions alone.

7. The real issue is that people do not bother about insurance until an adviser takes the trouble to convince them that they need insurance. Even then, the customer does not want to pay until they get the insurance (have tried charging fees for just risk advice and this is my experience). It will not make commercial sense for an adviser to spend time convincing people who think they are invincible to get insurance, when the people don’t want to pay the adviser to convince them. So unless the customer has other business with me which pays me for my time, I would introduce the subject of insurance but if the customer is not interested, would not waste any more time and file note that the customer was not interested. At the end of the day, we are running a business and don’t want to go broke, trying to help people that take a lot of time to understand that they need help! It’s their life and if things go wrong, they can fight with Centrelink or whoever!

   Unfortunately, the people who need insurance most are the people who cannot afford to pay for any financial services, so there will be a big section of the population that will miss out. Advisers will have to look after only the rich (or relatively rich) in order to survive in the industry. The practices that have high net worth clients will prosper as they can charge fees and the rest will slowly go broke!

8. If risk commissions are banned,there will be a collapse in risk insurance sales,as sure as the sun rises and sets.
   We employ and pay the incomes of 4 people and we are looking to bring on more staff in the near future.
   I will immediately have to let go, three of my employees if commissions are banned and I will stop writing risk insurance, as 100% of clients I have surveyed,have said they would not pay the required fee’s for us to provide appropriate insurance advise and administration services to look after them.

   In both small and large Business,profitability and survivability can only occur with cashflow.

   If commissions are banned,the immediate impact will be a reduction in cashflow,followed by a total loss of profit.

   There needs to be some education and practical experiance,with 12 months data collection, to highlight the results and implications of a reduction in income and the best way to do that, is to reduce the salaries by 50% of all participants in the Government,Industry Super funds,Union employee’s and everyone else pushing this agenda and we can all watch and guage that result,which would have little or no impact on the majority of Australians,so it would not be a bad experiment to conduct.

   However,I feel there would be mass strikes after one day,let alone 12 months if this proposal was put forward and yet these very people have the temerity to say that banning our incomes is a good and fair system,without looking at the implications to every Australian if this absurd proposal was enacted.

   I will debate anyone, anytime, anywhere on the immediate and future impact of this ridiculous proposal and if the Government is serious about the welfare of all it’s citizens,then they had better start listening to people with practical knowledge and stop listening to theorists who have little understanding of the real world.

9. What will I do? I will stand to profit upon the death of my clients by invoicing their surviving spouse to cover the cost of me processing the claim. Barbaric you say? Send your complaints to Jeremy Cooper.

10. It is hard enough to get people to pay premiums for insurance EVERY YEAR! People think it won’t happen to me and therefore see no need to have insurance in place. What a complete waste of time it would be to charge someone a fee to convince them they need to pay premiums. Reality is, there would be no incentive to get people to understand the real risks of life and take out policies with a company, when the company is not paying us a fee or revenue for the business we have submitted to them. Most risk only adviser businesses would close shop. All support staff would be put off and be unemployed. Only the wealthy people would be able to pay a fee to an insurance adviser. Unfortunately the average and less than average Australian will not be able to pay our fees. We need to run a business, we have responsibilities ie. tax, GST, rent, expenses, salaries; we would discriminate and only speak to high net worth individuals (that is if we stayed in the industry). Lots of professions earn commission eg. general insurance brokers, all types of sales jobs, real estate agents, stockbrokers etc.

11. I decided to change from a general financial adviser to a specialist insurance adviser to provide advice to individuals about protecting their assets, family and income.
    Why shouldn’t an insurance company pay me a fee, payment, commission whatever the word is, for directing people to pay premiums for their products for Life, Disability, Income etc.
    Commissions should be the SAME % for ALL INSURERS and then there is no conflict of interest or bias. Then we can get onto doing what we do everyday and speak to people about protecting their most important assets.

12. I would consider leaving the industry, after studying for 5 years and with 10 years of experience. What a waste it would be.
    Insurance and the Financial Planning world are completely different. The investment portfolio and superannuation fund is a real, certain product than you can redeem at some point to receipt the money and balance.
    The insurance policy on the other hand is paying a premium every year for something that you may never receive anything back for. No wonder people don’t see the value in having a policy and paying premiums every year. Commissions should remain, otherwise the insurance industry would collapse. People need an adviser to explain, educate, advise them and manage the implementation and claim.

13. I would leave this industry. The amount of work that we do to get people to take out cover with companies is enormous. Meetings, paperwork, research, quotes, writing an advice document etc
    Then after all that work, the blood test or medical or their pre-existing medical conditions can mean that the insurance company declines the application or offers loadings on the premium or exclusions. People therefore can end up with nothing or not accept the terms offered by the insurance company. This insurance/risk industry is a “risk” for the adviser’s time and client.
    There are alot of unhealthy, overweight people out there. Also lots of people smoke. Why would an adviser bother trying to get these people cover when the outcome is very likely to mean no cover. But “here is my fee/invoice for the last couple of months work, but I do realise that you still have no cover in place”.
    Commissions should remain, paid by the insurer to an adviser for all the work performed.

14. The more I think about tis the more insane it becomes.
    I have decided to start doing business in New zealand,I have the advantage of having come from there originally so its no big deal for me.If tghings go pear shape here , I will no doubt loose a LOT of money as the asset value of the business will be ZIP. So much for 28 years of toil to build something worthwhile. Oh and the 3 staff! they will need to consider a career change along the the thousands of others thrown on the unemployment heap by the Unions and Labour!

15. Submitting business to an insurance company for clients is so uncertain. The application may be declined due to abnormal blood tests, high blood pressure, high cholestrol etc. After all the work to review the client’s situation, write the statement of advice document, have more meetings to complete the application, submit to the company and then to hear that it has been declined ro given a premium loading (that the client will not pay and proceed with), makes this job incredibly risky and very unpredictable. I would leave the industry, and let go all my support staff to do something else.

16. A word from the UK. The ‘Retail Distribution Review’ RDR (the UK version of FoFA) comes into effect in 2012. It bans commissions on all investment business. However, it has now been agreed not to ban risk commissions although there will be some additional disclosure requiremnents where investments and risk business are arranged together. The key argument was that, for risk business only, commissions are clearly aligned to the consumer interest. Advisers get a clawback if the customer lapses the policy – this means the adviser has a vested financial interest in ensuring that the customer is satisfied with their purchase over time. The same cannot be said of commissions on lump sum investments which are fully earned up-front. Against this, the regulator identified no consumer detriment from risk commissions and the industry (ABI) presented clear consumer reseach evidence that consumers will not pay fees for risk advice. Good luck with the debate in Oz – I hope the industry is fully engaged with the Treasury because the argument is too important to be decided without a clear understanding of all the wider issues – including the impact on the degree of under-insurance.

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