Advisers have been reminded that any new life insurance business submitted in 2019 but completed in 2020 will be subject to the 2020 Life Insurance Framework remuneration levels.
Typical of notices being issued is a reminder that was sent by OnePath Life to its network of advisers in late October. The insurer clarified that for advisers to receive the current maximum 77% hybrid commission rate available under the Life Insurance Framework remuneration transition period, the submitted policy application will need to be in force by 31 December 2019.
OnePath reaffirmed to advisers the Life Insurance Framework legislation mandates that no transition period is allowable for business submitted prior to the end of 2019 and accepted from 1 January 2020. It confirms any new business coming into force from 1 January 2020 will have a maximum hybrid commission rate of 66% in the first year (60% plus GST) and 22% (20% plus GST) ongoing trail commissions.
77% or 66% is a lie.
As usual, some story tellers never let the truth get in the way of a good story.
For a client paying $1,000 a year as a monthly premium, the actual commission from January will be around 46%, as it appears the initial promise of paying commission based on the actual premium, has been forgotten.
So what we have from January, is the 66% – GST – policy fee – modal loading – stamp duty.
For some advisers in different states, stamp duty is double at 10%, some Life Companies charge up to $115 a year in policy fees and modal loadings vary, so the 46% is in many instances, a best case scenario.
As it costs Practices over $3,000 to do basic BID advice and implementation in the current world we live in, this means clients will need to pay around $6,500 pa in premiums, just for a Risk practice to break even.
Of course, if the clients circumstances change and the client needs to cancel 11 months later, the practice will be hit with a 100% write back and a $3,000 loss.
If the client gets a renewal notice in month 23 and is told they will be paying double digit higher premiums and immediately cancels, the practice will cop a 60% write back.
The Life Companies will need to, as a collective, approach the Government and offer to pay commission based on actual premiums paid and while they are at it, take the commission back to 80% plus GST which is the minimum that Risk Advice Practices will need to make it viable to continue.
Oh and while I am on my high horse, get some consistency with premiums, so clients are not hit with unsustainable premium increases, which are the main cause of lapses.
Couldn’t have said it better Jeremy!
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