Call for Re-Think on Risk Commissions


Noted actuary, John Trowbridge, has called on the Government, regulators and other industry stakeholders to reconsider the 60/20 risk commission model presently mandated under the Life Insurance Framework reforms.

Speaking at the 2020 FSC Life Insurance Summit during a panel session considering the current state of the life insurance industry, Trowbridge said his main concern related to what he characterised as a crisis in the distribution of retail life insurance.

John Trowbridge …the implementation of the 60/20 commission model under the LIF reforms …has limited the ability of advisers to deal with their customers

He noted the significant reduction in the number of life insurance advisers in recent years, meaning less Australians, especially those in the middle market or mums and dads sector, are receiving access to critical life insurance advice.

Role of Advisers

In proposing a revised remuneration structure for risk advice, Trowbridge emphasised that, while some industries may be able to rely on direct access and commoditised products, when it comes to life insurance advice, that model doesn’t work. He maintains that for life insurance to be accessed properly by consumers it needs to be accompanied by advice.

…the implementation of the 60/20 commission model …has limited the ability of advisers to deal with their customers

Trowbridge acknowledged and supported the agenda of both Government and regulator to serve the best interests of the consumer by the removal of misaligned incentives and conflicts of interest. However, he warned that the implementation of the 60/20 commission model under the LIF reforms, when combined with stringent SoA and other regulatory requirements “…has limited the ability of advisers to deal with their customers.”

In order for risk advisers to have the commercial capacity to provide advice to the mums and dads market, Trowbridge proposes a revised model which effectively reduces remuneration levels on higher sums insured but makes it more attractive for advisers to deal in the mid-market:

Revised remuneration model chart presented by John Trowbridge at the 2020 FSC Life Insurance Summit…

The structure of Trowbridge’s recommendation mirrors the remuneration model for life insurance advice he initially proposed in 2015 in the final version of what has become known as the Trowbridge Report, namely the report from the independent chair (Trowbridge) of the Life Insurance and Advice Working Group (see: 20% Flat Commissions – Trowbridge).

Rather than the $1,200 Initial Advice Payment (IAP) proposed by Trowbridge in 2015, his revised model in 2020 advocates for a $2,000 IAP to be paid to advisers, accompanied by a flat 20% commission annual payment.

According to Trowbridge, either at the FSC Life Insurance Summit session or in speaking later with Riskinfo, his revised proposal delivers the following benefits:

  • Assuming an average cost of $2,000 – $3,000 to place a life policy on the books, the new model gives advisers the commercial ability to deliver life insurance advice to the mums and dads market
  • Removes any clawbacks of upfront commissions because only renewal commissions are payable in conjunction with the $2,000 IAP
  • Observes the Government and regulator’s agenda to better align the interests of advisers and their clients while removing or significantly minimising any conflict of interest, real or perceived

This new model naturally does not remunerate the adviser if no life insurance policies are placed as a result of the advice. However, this has always been the case, whether it applies to the LIF remuneration model or to the open commission system it replaced.

Trowbridge told Riskinfo he appreciates the remuneration recommendations contained in his final report in 2015 generated significant opposition from advisers and adviser associations, particularly the AFA, which was a participant on the Life Insurance and Advice Working Group, but which did not support his final recommendations.

With a view to finding a solution, however – which would enable risk advisers to financially survive and prosper while serving the life insurance needs of middle Australia – Trowbridge said advancements will have been made if the debate becomes about the numbers he proposes (ie the level of the IAP and renewal commission), rather than the structure of the underlying model itself.

Editor’s Note: We welcome your considered and measured comments on this article, as part of an ongoing debate which attaches to the future viability of retail life insurance advice in Australia.


  1. I can see the insururs jumping with joy to throw out an additional $2,000 per life insured! atleast this model might create the incentive for risk advisers to stay, or even come back!

  2. im sure the insurers are jumping with joy at the thought of paying out an extra $2,000 per life insured. Atleast this might get the risk advisers to stay or even come back. or atleast offer their services to the regular mum and dads.

  3. so, the reason behind the Trowbridge report, was proven to be false. The churn issue was proven to be fabricated by the Bank led FSC, and confirmed by ASIC. pre Trowbridge was terrible: back when the industry was sustainable, and profitable for insurers, Advisers and Clients were paying less for their premiums. What an awful world. Again another industry screwed by the banks

  4. This is the problem when you have those who have no idea, trying to impose on those who are doing it!

    • Remember, he did what the FSC wanted him to do. Now he is putting out a red herring. Who will pay for this?

  5. Words fail me. An outcome that was as predictable as planting seeds. Oh and of course premiums are still only heading in one direction(up), while the quality of insurance contracts heads south. The trajectory for risk insurance in a country with one of the highest debt levels per capita is not good. I have said before, I live in hope that someone with influence will do something, but I am not overly optimistic.

  6. So if in assessing Best Interest, we come up with a client taking up life & TPD through their industry super (I know – unlikely – but humour me), a stand alone trauma with one provider and because of occupational limitations, IP with another, do I then generate $6k – being $2k from each insurer? Or will the Industry Funds be exempt in some ridiculous double standard? And if I do the same for the spouse and end up with $12k, is it reasonable, even if it’s only $8k in premium????
    This proposal simply doesn’t work.

    • Well thought through Indy! I didn’t get that far 🙂 – yes, very good questions I would very much like to see these ‘luminaries’ answer!

      • Not “******” likely They really do not understand or in Mr Trowbridge’s case put any thought into his theory at all ? My 9 year old grandson could see holes in his theory.
        Dear me and we have theses people to thank for our current atrocious position

  7. So if I put the Life with Company A, the Trauma with Company B & the IP with Company C I get $6,000? Good plan! The only good news is that it seems to be slowly dawning on the powers that be that the industry is in crisis. The bad news is they believe the same people who created our current mess can fix it. At present I am doing everything I can to avoid writing new business and nothing this article is proposing will change that.

    • What about placing the $5Mill of Life Cover for a total combined premium of $20,000 across 5 different policies with the same insurer all for $1Mill each and an individual policy premium of $4000 each.?
      Does that equate to 5 x the $2000 IAP ($10,000) and then a 20% renewal commission on each of the 5 policy’s without any clawback ?
      This is ridiculous.
      So, Trowbridge claims the ” average” cost of initial advice is between $2000-$3000.
      In his “revised” model, what about a large and complex insurance case that takes a very large amount of work to complete over an extended time frame and the premium is $50,000.?
      How much would the adviser get paid then ????

  8. So having got it so wrong in the first place, he still wants a seat at the table.

    This entire mess was created based on a false premise. If I was a more cynical person, I would say that their goal was to starve us into submission and then offer us a grain of rice to show what nice people they are to the needy. It’s a good thing I’m not cynical, hey?

  9. I hope Trowbridge reads RiskInfo and the responses from advisers to his latest proposal. It’s interesting that he acknowledges his initial recommendations were opposed by advisers and more notably, the AFA. The problem is, he’s still around. To paraphrase what my peers have said in earlier comments, we have someone making proposals who doesn’t really know what we do – and I am referring specifically to risk insurance only advisers. It is the advisers who should be consulted, but we are not! I do hope the AFA comes out with an appropriate response. Lastly, and I’m going to be direct about this, I feel like moving for a vote of no confidence in Trowbridge.

  10. $2,000?? Where does this number come from? Still completely inadequate in most cases. Again, academics meddling in which they have no experience is what we must endure!

  11. 15-20 minutes wasted providing an opinion about this article, an accurate account of a past event and character assessment of John Trowbridge, only to have them all deleted???? Mmm…thats disappointing.

  12. To me, it seems that the regulators haven’t a clue as to how to manage our industry. It’s as though they’re in a strange house in the middle of the night with no lights on. They open one door, and finding it leads nowhere, try another and it goes nowhere either. They’re dismantling an essential industry which the regulator has broken and, totally clueless, doesn’t know how to fix. What a mess!

  13. If we look at a time line and the issues the Industry faced before Trowbridge made his recommendations, then extrapolate his assumptions back then, to what has occurred since, it makes for interesting reading.

    Before Trowbridge, the industry was sustainable, profitable, ASIC has since confirmed there was not a churn issue and FOS/AFCA have always confirmed the number of complaints about life insurance advisers was negligible.

    The complaints body has even recently applauded the work Advisers provide.

    After Trowbridge and the LIF tinkering, advisers businesses have been destroyed, most consumers can no longer access quality advice and the Retail Life Insurers are on the brink.

    Why is the industry so broken after these so called improvements?

    All of this is driven by greed and the opportunity for Life Companies, via their mouthpiece, the FSC, to drive home a false premise of churn, the releasing and encouragement of vested interest lobbyists and a gullible Government that have been led round the garden by ASIC who have never understood how the advised Life Insurance Industry works in the real world.

    Even at this crisis point, ASIC is making statements that they will wait till 2021 to make their assessment.

    The British Prime Minister Chamberlain, waved a white bit of paper signed by Hitler and proudly boasted that he had averted war. The outspoken Churchill, who had been warning of a disaster unless Hitler was put in his box, was ignored and we all know what happened next.

    The chickens have come home to roost with the current fiasco that is the LIF.

    The hen keeper (ASIC) keeps letting in the fox to cause mayhem and their solution, is to keep the hen house door open, while they sit around and have many discussions on the issue of the declining hen population.

    If we want a true solution and it is an easy fix, then ASIC must be removed from this discussion, as they ARE the fox, dressed up as a saviour.

    As for Trowbridge, he may have some second thoughts as to why the Industry is in a downward spiral, though his solution is not viable, as it is a one dimensional approach to a multi-faceted problem.

  14. This is a completely failed proposition.
    It is inconceivable following the disaster of the original proposal put forward and after so many comments in relation to needing to be returning the commission rates to at least the 80/20 model to ensure financial survival of adviser’s businesses into the future that Trowbridge still comes out with another proposal that would never work in the real world at all.
    All this ******** about the ” average ” cost to put business in place.
    What about the high end risk clients that still have a real need for high quality insurance advice and strategy ?
    How would the adviser then be adequately remunerated for the complex nature and process of providing advice for these clients?….or are we all just meant to be dealing with the so called
    ” average ” mum & dad client and have a process in place to control exactly what we earn.?
    This is a free market economy that is looking more like a Socialist model every day.
    There is no other industry that is more controlled in regard to how much someone can earn than the current Life Insurance industry.
    It is strangling to death in a sea of over regulation and over arching controls.

  15. Is this a $2000 IAP PLUS the 20% commission paid UP FRONT in the first year or is the 20% commission component only paid on the drip feed every month in the first 12 months ?
    If it’s the former, then based on a $10,000 annual premium the adviser would only receive a total of $4000 for the initial advice (at present, the adviser would receive $6000 @60/20)
    If it’s the latter, the adviser would only receive $2000 plus $166 per month for the first 12 months.
    If someone can confirm I am looking at this correctly, please advise.

  16. Basically this whole model discriminates against advisers who work with larger risk insurance clients with much more complex cases and significantly longer time frames involved in successfully placing the business….if at all.
    This is a discriminatory model designed to limit and control the level of remuneration an adviser is able to earn and to penalise them for specialising in a certain client demographic.

  17. This is some kind of joke….right ?

    The insurers with life after LIF (forgive the pun) thought they would have free for all by marketing inferior contracts direct and eliminating advisers in the process altogether.
    The Royal Commission showed the true colours of those life insurance companies who thought they could could “spear ” an unsophisticated public with a poor direct sales culture and inferior contracts.
    Now reality has set in, the life companies got what they wished for. They, via the FSC have destroyed the industry as such,so they’ve got what they wished for.
    Mr Trowbridge belated proposal is akin to smashing a perfectly good glass and then trying to glue the pieces back together again, and expecting it to hold water.

    Here’s a newsflash, you’re too late, you’ve destroyed the industry.
    Fewer life companies means less competition, how does that serve the best interest of clients.
    “Me too” inferior contracts now being offered provide no product differentiation, how does one shoe fit all,… benefit clients ?

    Instead of starting with a false premise as the catalyst for change, you should have consulted with the advisers and you would have been better educated
    I said it when these changes were being legislated……
    “Vail the life insurance industry”…RIP !!!!

  18. Like Banquo’s ghost, Mr T has re-appeared as if through the mists of time, having sown the seeds for the cancerous growth that wrecked what was a perfectly profitable industry for all participants and providing insurance to retail clients at affordable premiums. And to be fair, Mr T’s original recommendations were then seized upon by the banks and ASIC (for entirely different reasons) and severely modified on the basis of the later (miss-proven) allegations of churning. A gestation somewhat similar to the Sydney Opera House.

    I’m seeking to be generous here. It would appear that Mr T is being driven (partly) by his (seemingly) recently acquired professional experience that every Statutory Number 1 Fund in this country is under severe threat from a lack of inputs from genuine fully underwritten (non-group) new business. No fresh meat!

    But the train wreck that is life risk sales in Australia today was obvious to anyone with even a peripheral interest in the operation of life insurance companies after the second year of LIF, but apparently not to ASIC. Even the sleepers over at APRA may have been aware of the impending doom, but they were always late to any party. And that train wreck is still sliding and graunching, carriages still spearing off into the bush, with no sign of the accident investigators.

    I have long believed that the three years of rapid premium increases we have experienced across all products since LIF was announced is not primarily the result of excessive unpredicted claims. It is now obvious that many experienced advisors with good books of risk business chose not to write new business under LIF, unless absolutely compelled, preferring to increase existing policies on pre-LIF upfront commission rates and only risk a one year clawback on settled clients.

    No fresh young new business in that outcome-just older risk getting more claimable by the day with even bigger sum insureds. Even today Guy Mankey, who we all know from MDRT, made a comment on the Risk Info blog that he avoids writing new business under LIF if at all possible. He is not alone!

    Most honest life insurer CEOs would admit that no fresh new business is not a good outcome of LIF. Sadly those same CEOs lack the guts to tell the Government that it is not wearing any clothes post LIF. At least, not prepared to state it,just yet! The peer pressure at the FSC must be horrendous.

    Mr T is now seeking to restore prestige. My first question is this – in his first manifestation he was consulting to the FSC, so is he still consulting for, indirectly or on behalf, of the FSC. I’m talking about what’s going on behind the façade of a lobby group. The FSC is always obvious in their motives (nil distribution costs for life insurers) but never transparent in their actions.

    Very interesting graph provided by Mr T in Risk Info. The section showing premiums per life from $6000 per annum to $12,000 per annum seems to justify his argument that old pre-LIF commissions were too high for that level of premium. But any life risk advisor who’s been in the business insurance market knows that these cases take months to complete, with the adviser having to coordinate so-called “professional advisers”, while trying to head off accountants running interference, and arrange medical reports with a business-person in his 50s who’s had too much of a good life.

    It reminds me of my last public-service CEO boss in 1988 who was on $165,000pa, but by choice worked a 70 hour week- $45 per hour. He thought he earned $150 per hour plus.

    Six months hard work would be a minimum for a case with that sort of premium. In that time the adviser would be fully focused on the case, particularly as the moment of conclusion drew nearer. Smaller less-paying clients would probably be sacrificed or at least deferred. My experience tells me that each one of those cases would take at least 5 hours a week for most of those six months, and at $250 an hour I would be should be seeking remuneration of around $6,000 just to cover costs for the project management of the exercise, never mind the strategic advice and the gathering of information in five-minute lumps when the potential insureds were available for interview. And then there’s the time for the Business SOA.

    There is no indication that either Mr T or ASIC have any idea how much time is involved in big premium cases.

    Mr T is still hanging his hat on an upfront fee to be paid by the insurers to advisers per client and 20% level commission. He doesn’t talk about clawbacks but if that first year premium is paid monthly and falls over at month nine there will still be a clawback, albeit on a lesser amount. Clawbacks hurt! Then there is the question of what happens when the adviser, always acting in the best interests of the client as we’ve all done for 150 years, decides to split the cover between insurers. Is that $2,500 fee paid once, or twice, or is his proposition a sneaky FSC ploy to convince advisers to put all insurance with the one insurer?

    Anyway, Trowbridge Version 2 is still un-workable, and favours insurers, which makes me think he still has an eye out for the FSC objectives. Pleas elaborate Mr T.

    This latest apparently off the cuff response is as silly today as it was when he first introduced it four years ago. He has effectively admitted the first fee ($1,250) was inappropriate and unrealistic, as advisers said at the time. The second proposed fee remains in that category.

    I assume that Mr T in his usual fashion hasn’t spoken to real risk-only advisers. Otherwise he would know that there are some obvious solutions to the main problem as follows:-

    • advice fees (but not implementation fees) should become fully tax-deductible
    • the 80:20 split is restored as the standard upfront option
    • a one year clawback should be reinstated
    • ASIC should be instructed to reduce the compliance load on risk advice. Ten to 12 hours to compile a risk only SOA is a joke

    And while we are on the subject, the FSC proposal to replace SOAs with ROA’s in this week’s news is nothing more than a sneaky way to provide direct insurers with the capacity to sell crap products under personal advice rules, without paperwork and compliance. That proposal should be resisted furiously

    In another forum, Danielle Press, an ASIC Commissioner, formerly with the Productivity Commission, in appearing before Tim Wilson’s committee, yesterday accused licensees and their lawyer advisers of over interpreting ASIC’s requirement for compliance. She clearly has no idea how risk advisers operate and in particular she has no idea how licensees operate, in a poisonous environment of fear and loathing, particularly when faced with ever increasing PI insurance costs, not to mention the threat that AFCA poses to financial advisers and their licensees.

    Ms Press has it all in front of her. Right now ASIC is causing mayhem with licensees with the 10 year “look back” audit rule, which is also been picked up by AFCA.

    • Hey Old Risky…replying several weeks later than I first commented on this story (as my original comments were deleted by editing) but there is one extra piece of support I’d like to add to your comments about ‘Mr. T’s’ observation on just how much money we riskies, are all earning.

      I watched this bloke and his mate Peter Switzer blatantly mislead the Australian public one night on ‘Switzer’ that made me absolutely furious leading up to the LIF Reforms. They both candidly sat there on camera and spoke about how easily advisers could annually churn $10,000 premium clients (not the minuscule $6,000 clients you referred to in your comments) and get paid 120% commission EVERY year doing it. I was just furious at the deceitfulness of them both.

      Firstly…only one company paid 120% upfront commission at the time as I recall it (AMP). I never even so much as had one of their PDS’s in my office was the disdain I had for them as competitive, high quality insurer for my clients. My judgement back then has well and truly been vindicated today!

      Secondly, $10,000 clients come along once a year for 9/10 advisers.

      Thirdly, advisers didn’t get 120% upfront. 10% of that went to the Government as GST. Then there are Licensee costs, research quoting software and CRM costs, online education, industry body members fees, PI Insurance and the actual costs relating to the time spent working through the process of a policy that size with client visits, transport etc.

      Was any of that mentioned once by either Mr T or Switzer? Hell no! Forget the whole truth.

      It was infuriating to watch this though and then see LIF unfold the way it did – and what we’ve all experienced as a result. This bloke needs to stay the hell out of this industry. He is either totally delusional about what he thinks risk advisers earn or just twisted and jealous he chose general insurance, not life insurance as career.

      He has no integrity or true knowledge about the life insurance industry at all though, IN MY OPINION.

      (Now, lets see if this gets deleted)

  19. The greedy insurance companies (via the FSC) pushed for LIF (60 upfront /20 trail) because they naively thought that by paying advisers less, they’d be able to keep more.

    These highly paid fools (insurance CEOs and executives) mustn’t have paid attention during economics class when supply and demand was being taught and were too stubborn to listen to the multiple voices of experience.

    FSC helped the banks sell their insurance businesses at a premium (because the expense line for commissions was reduced but top line for revenues hadn’t been adjusted downwards because the effects were too soon to be seen when they were sold) and exited the industry.

    ASIC in the meantime still collected their ironclad salaries and lucrative bonuses for doing “an awesome job” while the industry they had oversight of was crumbling beneath and the public’s best interest was not being safeguarded. Because ASIC was asleep at the wheel, Hayne (a career lawyer with no clue about financial advice or mortgage broking) got the wool pulled over his eyes by the big banks so whilst it was a Royal Commission into Banking Misconduct, strayed outside his remit to recommend banning of Life Insurance commissions and Mortgage Broking commissions predicated on the Netherlands Model where in Holland new home buyers are required by law to take out personal insurance in order to get a home loan.

    The botched jobs that are LIF, the Royal Commission and FASEA have caused many good and experienced Risk Advisers who have been doing the right thing for decades to throw their hands up in frustration and walk away from the insurance advice industry. This has further exacerbated the issue by reducing the insurers’ distribution channel and this has caused APRA to jump in with their harebrained ideas without any meaningful consultation (and I suspect at the beckoning of the insurers remaining in the industry) to come up with stupid proposals, that the insurers can say “It’s not what we want, it what APRA is forcing on us and everyone” (much like what they said after LIF).

    The parallels that this sad story has to the introduction of cane toads in Australia is scary.

    The long term implications are scarier still.

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