Perhaps unsurprisingly, the strongest engagement among Riskinfo readers this week was around a call for the industry to return to 100% upfront commissions in order to stem the continuing exodus of risk focussed and risk only financial advisers from the Australian market…
Up-front commissions on life policies and other risk products should be moved back to 100% to incentivise advisers to retain risk advice in their client proposition, suggests Radar Results’ John Birt.
Writing in the firm’s newsletter last week, Birt says the Government wants more Australians covered by more life insurance and financial planning advice “…but they have done the opposite by providing less income to the advisers by having non-commercial claw-backs.”
Birt outlines how the maximum upfront commission payment is currently set at 60% with renewal commission payment at 20% on life insurance policies and other risk insurance products, noting that before this prescribed setting under the LIF reforms, up-front commission payments were 100%+ of the annual premium.
He also referenced claw-backs of up-front commission payments for policies cancelled inside the first two years of commencement in stating:
…I’m still amazed as to why these limits were imposed in the first place…
“I’m still amazed as to why these limits were imposed in the first place. I have not seen any premium reductions by the insurance companies, who are now paying lower commissions.”
Birt adds that thousands of life agents and advisers have left the industry due to the lower commission levels, “…and many more will.”
“Back in the 80s, some life products paid 150% commission, and I know the consensus is that this leads to churning to make a commission, but it can be managed with the right conditions and monitoring,” he says, adding that this is now ”… illegal, heavily monitored, and totally against the Corporations Act.”