Life insurance new business would decrease under the proposed Future of Financial Advice (FoFA) reform measures, according to research firm DEXX&R.
The researcher has released findings of a study it has conducted into the projected impact of the FoFA reforms as currently outlined. It considered seven different scenarios over a ten-year period commencing from January 2011.
Under all scenarios DEXX&R projects life insurance sales will go backwards.
Taking into account its ‘best case’ scenario (which assumes the FoFA regulations would include a ban on super risk commissions), the best case assumptions projected:
Lump Sum Insurance
- Individual Lump sum new business will decrease each year from 2013. The total decrease in new lump sum business between 2013 and 2020 is projected to be $742 million.
- New business commission is projected to be $294 million lower by 2020
- In-force Lump Sum business will be $802 million lower in 2020 than under the no change scenario
- Total lump sum new business and renewal commission will be $647 million lower in 2020
Disability Income Insurance
- Individual Disability Income new business will decrease each year from 2013. The total decrease in new disability business between 2013 and 2020 is projected to be $48 million.
- New business commission is projected to be $73 million lower by 2020
- In-force Disability Income business will be $139 million lower in 2020
- Total new business and renewal commission will be $157 million lower in 2020
DEXX&R says the negative impact on adviser new business and renewal commission is projected to be proportionately higher than these new business figures.
