Latest Poll – Increasing Risk Commissions

Any future campaign to increase LIF commission caps should be accompanied in equal measure by a campaign to reduce the cost of life insurance advice.
  • Agree (85%)
  • Disagree (9%)
  • Not sure (5%)
Our latest poll considers how the life insurance industry should approach any future push to increase commission caps.

The question stems from a CEO panel discussion at this week’s AFA 2021 Evolve Hybrid Conference, during which CEOs were asked whether the significant reduction in year one remuneration under the LIF reforms to a cap of 60% was, in retrospect, a mistake.

The two CEOs on the panel who were also in charge during the debate leading to the LIF reforms, TAL’s Brett Clark and AIA Australia’s Damien Mu, indicated that the industry was very close to having either fee-for-service or level commission as the only remuneration outcomes acceptable to the policy makers at the time, and that arriving at a 60/20 hybrid commission cap – although 80/20 had been supported and advocated by the insurers – avoided the sector from being forced to operate under either a fee or level commission remuneration structure for life insurance advice.

Since the implementation of the LIF reforms, however, calls have grown louder for a review of the LIF commission caps, as evidence mounts to support the contention that the 60/20 commission model simply does not support a viable risk advice business.

…the recommendation …was for industry advocates to call for an increase in commission caps only as part of a broader change agenda

In asking the CEOs whether there was an appetite among insurers to now push for an increase in year one commission to, say, 70%, the recommendation made by both CEOs was for industry advocates to call for an increase in commission caps only as part of a broader change agenda that would also include an equal focus on reducing costs.

A more fruitful and productive discussion with policy makers, according to Clark, would be based around how the industry can remove costs from the advice process, such as red tape and other regulations that are making advisers’ jobs so difficult.

AFA GM Policy and Professionalism, Phil Anderson and AFA National Vice-President, Sam Perera, grill Australia’s ‘big four’ life company senior execs during the CEO panel session at this week’s AFA Evolve Hybrid Conference

This argument sounds balanced and reasonable, within a potentially fraught future debate the CEOs caution must be undertaken thoughtfully and with great care. But do you agree?

While most advice business operators would agree that revenue growth and cost control are both vital components in their bottom line, are they equally critical?

Even for those who contend that increasing revenue in a small business is more important than reducing costs, the CEOs’ comments remind us that the debate isn’t straight forward – and that any future approach to policy makers needs to be made through the lens of how a thriving and sustainable risk advice sector will better serve the community, rather than through the lens of how increasing commission caps will enable risk advice businesses to remain financially viable.

As always, there’s more to say – and we’ve already said too much – but we hope you’ve got the idea! Tell us what you think and we’ll report back next week…


  1. Name one industry that operates under a commission model that has not ended in tears. Especially when the recipients of the commission are supposed to be in acting in the best interests of others. Commissions and BID are irreconcilable by nature.

  2. Mu and Clark! These are the two CEOS most responsible for first-moving on increasing level commissions on a regular basis, destroying relationships between Advisers and clients. Now both are looking at GA call centres to compete with their long-time loyal Advisers. Clearview, Zurich and Metlife have complete opposite opinions to Mu and Clark when it comes to commission caps. These two know that fee for service is sky-high more expensive for the client, which will drive business to their call centres, they are driven be extreme profit. In the industry billions were saved by these companies when commissions went from 120% to 60% and they still ratchetted-up insurance premiums. BTW insurance commissions in NZ are still over 200%, switching rates are as low as Australia and the Industry and clients are thriving – and some Australian companies are providing or underwriting the insurance in NZ paying 200%. How can these two ever be taken seriously.

  3. Brontosaurus, your ideology with regards to commission on Life Insurance being against BID, is an argument similar to your namesake.

    You clearly have no idea of what you are talking about and it is probably better for your reputation that you remain anonymous.

    As to the commission level, everyone wants the Industry to be able to operate in a profitable manner and all participants be fairly treated.

    If the cost to provide Advice reduces, then there will be a crossover point where the current Commission level could be manageable, though in order for this to be achieved, all parties involved, including the Regulators and the Government, need to be cognizant of the maze that caused the chaos currently being endured and that they are truly open to making it simpler and more cost effective to provide advice.

    • Please indulge everyone with how adviser commissions and client best interests are aligned.

      The sooner Life Insurance stops pretending it is “different” to every other good/service, the sooner the industry might start heading in the right direction. Doubtful though, given that too many parties are over-invested in the one (failing) business model.

      • Brontosaurus you have no idea what you are talking about. Short answer – your model is seeing less people insured and less people in need being covered or paid, leaving them abandoned. ASIC found less than one percent of insurance sales could be attributed to commission influence. All insurers now pay the same, FASEA and best interests are effective at minimising any lingering effect of commission sales, which are significantly cheaper for the client to be covered. The hypothetical is one thing, what happens on the ground is different. Your model has seen less people protected and cost soaring. You need facts and you need to open your eyes and look at the outcomes, then you can contribute to the solution.

        • What exactly is “my” model? I never suggested an alternative. I was just pointing out that the commission model, like all others, is doing a good impersonation of the Hingenberg. It is good for a while but we all know how it ends.

          Slavish adherence to the idea that the only options are commissions or fees is helping no one.

  4. 100/15 splits should be re-introduced. Client’s are cancelling insurances and we know the model these 2 idiots want. Kill of risk businesses, conduct a GA model.

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