Government to Consider Mandating Level Commissions for Risk


The Federal Government  is contemplating the implementation of a flat life insurance commission structure in future, pending the outcome of ASIC’s review of the Life Insurance Framework reforms, due in 2021.

The Government’s position was outlined as part of its full response to the recommendations stemming from the final report of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.

As already reported, ten of the 76 recommendations made by Commissioner Hayne in his final report related to financial advice (see: Royal Commission Financial Advice Recommendations).

Recommendation 2.5 focused on the future of life insurance commissions, where the Comissioner’s recommendation states:

When ASIC conducts its review of conflicted remuneration relating to life risk insurance products and the operation of the ASIC Corporations (Life Insurance Commissions) Instrument 2017/510, ASIC should consider further reducing the cap on commissions in respect of life risk insurance products. Unless there is a clear justification for retaining those commissions, the cap should ultimately be reduced to zero.

…if the ASIC review does not identify significant improvement in the quality of advice, the Government stated it would move to mandate level commissions

The Government’s response notes existing reforms in relation to life insurance remuneration, ie the Life Insurance Framework reforms, and states that as part of these reforms, it had already announced that ASIC would conduct a review in 2021 “…to consider whether the reforms have better aligned the interests of advisers and consumers.”

The Government then makes its reference to flat commissions, noting that, if the ASIC review does not identify significant improvement in the quality of advice, the Government stated it would move to mandate level commissions, as was recommended by the Financial System Inquiry.

In its response, the Government added that it supports ASIC conducting this 2021 review, while also taking into account the factors identified by the Royal Commission when undertaking it.

Click here to access the Government’s full response to the Banking Royal Commission’s 76 recommendations.



  1. At least level commission is workable and maintains the value of our businesses. Trying to put a business plan in place, and stick to it, is extremely difficult when the goal posts are continually moved, or threatened to be moved. Do any of the “experts” have any small business expertise ( NO ! ) so they have no idea of what it takes to grow and nurture one. Their expertise lies in how to destroy businesses. How are the next generation of advisers going to get a start ?

  2. I remember a wise man years ago saying that commissions had to be set at a level that would allow a new entrant to the profession to be able to pay their bills for the time it took to establish themselves. Under a level commission structure, I can’t see how this would be achievable meaning the only way someone new to the business could afford to provide insurance advice would be through buying an existing business.

    • Yeah, I think that’s the most difficult thing with flat commission. It’s a deferred income pattern, that while may be fine in the long run (depending on levels), but creates a huge difficulty in the years getting up to a steady state.

  3. Any reduction from 60% will send most of us out of the industry I am already contemplating redundancies increased fee structures and limited assistance to claims etc if they don’t want to pay us let them resolve the claims issues directly. {which I hate the thought of but?} Lets see how many more staff are required by the insurers just to do that bit. .
    Hopefully there will be some common sense evolve from this now that all the cards on the table . The fight should now be on in earnest. No more” flowery” talk action is needed and needed now come on AFA I saw and read your latest email and trust its followed through with. I AM SUREyou have the full support of 25,000 advisers

  4. So, lets assume 30% or 20% flat commission.
    A $3000 insurance premium case at 30% will result in $900 commission or only $600 if at 20%.
    The case requires Fact Finding meeting, analysis and product comparisons, Statement of Advice, application completion and submission, underwriting discussions and follow up,
    additional meetings with clients to discuss loadings and/or exclusions and then finalisation.
    Prior to LIF, the adviser may have received payment of approx $3000 if taking full Upfront commission and the client received the insurance cover for $3000.
    Based on the above scenario, the insurance premium cost wont alter, so the client has to pay $3000 for the insurance and be handed an invoice for $2100 to allow the adviser to be appropriately remunerated for the 15 hours of work completed.
    So the client has just paid a total of $5100 for the insurance and the advice.
    Previously, the client would have received the same outcome for a cost of $3000.
    I want Kenneth Hayne and Josh Frydenburg to clearly explain how this example will produce a better consumer outcome than the current commission rates or the rates prior to LIF compared to a flat rate of commission or the recommended zero commission rate.
    I look forward to a logical and well thought out response.

  5. No,….. you will be expected to work for $0 because whatever fee you charge unless on a $10,000 premium case with a reduction based on Nil commission, the initial premium will reduce to $7,000 you may get away with a $3000 fee with no write back.
    But will a client really want to pay you an initial $3,000 fee for service, on risk only.

    How many $10,000 premium cases can you find ?
    Because you’re going to have to write more than 3 times as many cases as you used to for the same amount of remuneration.,
    Good luck with that.

    • That’s assuming the insurers will still be willing to reduce the premium if there is no commission at all.
      I know currently if the commission is reduced to zero, there is a reduction in premium, but think about why the premiums have never reduced when the upfronts have gone from 100% to 80%, 70% and soon to be 60% ??
      In fact, we all know that as commissions have been falling, the clients are paying higher premiums so there is likely to be no consumer benefit whatsoever.
      With the mandate already set that all insurers pay the same level of commission and advisers are governed by the best interest duty, the argument relating to conflicted remuneration is completely dead.
      There is no conflict at all if there is no differential between the percentage of commission across all providers.
      Conflicted remuneration in the risk space was entirely removed when LIF forced the commission rates to be standardised.
      For Hayne and others to continually force this notion upon everyone is incorrect.
      as it technically doesn’t no longer exists.

  6. I personally think the existing LIF rates will be reversed back to higher levels before it heads to a flat fee. This happened in other jursidictions and there is absolutely no reason to think Australia will be any different. In the meantime huge disruption for industry participants and bad outcomes for consumers which will ultimately result in more pressure for the tax payer.

    Why can’t people learn from the experiences of others? Why is it human nature to think that “we” know more than the millions of people that came before us.

  7. You’re all delusional. Even if we mounted the biggest industry kick back effort of all time – against the RC report – it won’t amount to a hill of beans. Labor will be in power and by the time we get to any ASIC review [in 2021] the writing will already be on the wall. Bill ‘Leftie’ Shorten only ever supported a flat 20% commission from the get-go. So the best possible outcome you can expect is 20% flat. Worst case, fee for service only. I’m just glad I won’t be around to worry about it. 40+ years in the industry now amounting to nought.

  8. 20% upfront & 2 year claw back is not viable, nor will it decrease ever increasing premiums. So consumers will never be better off which was the alleged point of the entire witch hunt. What do you think your business value is now? In 2 years time? Who is going to buy? The few buyers will be greatly outnumbered by sellers and can pay what they want. And what happens if you can’t find a buyer, does the book just fall back to the insurer? Who there will give any advice (not general in nature)

  9. The great thing about all these ASIC and Government press releases, plus the Royal
    Commission observations, (I state, “observations”, as they are clearly not based on facts regarding the retail, advised Life Insurance sector) is that ASIC have put themselves into a vice they cannot rescind or deny when they come up with their recommendations in 2021.

    Statements such as, “to consider whether the reforms have better aligned the interests of advisers and consumers”, means they will fail their own test and in actual fact,
    will highlight that ASIC has caused a detrimental impact for all Australians by their shallow and inaccurate prior recommendations.

    A junior solicitor with NIL court experience could easily defeat ASIC in court, though
    that will never happen, as the Legal profession are loathe to attack their own and besides, in order to bolster fee income to their brethren, the Legal eagles have done a side step shuffle that of course???? is in their clients best interest, by making it only the domain of Barristers who can charge substantial fees, to be briefed by solicitors, who also charge high fees, so the Barrister can present to the courts, their opinions, which any Solicitor with half a brain could do so, at a fraction of the cost.

    If the opinion of Hayne is anything to go by, then once again, the Tens of Millions of
    dollars of Tax Payers money spent, has, as usual, lined the pockets of the Legal eagles for what result?

    Let those same Legal Eagles and everyone involved in the fiasco we are seeing
    unfold, be asked to be held to the same account we are being held and watch the
    total indignation and contempt from those entities, that anyone would even consider such an outrageous demand.

    The only way we are going to win this fight is to take it to them all, like when the
    small Truckie Businesses blockaded Canberra as a last resort to get some justice and fair play against the Biggest Trucking Companies who were obviously pushing to rid themselves of competition.

    By 2021, the impact will show a decline in consumer outcomes around Life Insurance,
    BECAUSE OF ASIC and their actions.

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