- Moving commission caps from 60/20 to 80/20 (65%)
- Implementing an Experience Pathway for advisers of good standing (16%)
- Other initiatives (9%)
- Reducing the commission clawback period from 2 years to 1 year (6%)
- Not sure yet (3%)
The cold, hard light of commercial reality appears to be the primary concern for advisers in our latest poll, in which we seek your view on what it will take for you to continue writing life insurance solutions in future.
As we go to print, 63% of those voting think it’s all about being able to receive appropriate remuneration (ie 80/20 versus 60/20) when it gets down to their ability to continue to provide life insurance advice in the coming years.
In what may come as a surprise to some, the implementation of the new Labor Government’s proposed Experience Pathway for advisers of good standing was only selected by 17% as the most important factor. In part, this lower-than-anticipated number (for some) may relate to the meaningful proportion of advisers who have already achieved the minimum education standards required of them. Nonetheless – and for whatever reason – the ALP’s proposed Experience Pathway initiative sits in the shade when compared with the reality check of the commercial imperative associated with increasing commission caps from 60/20 to 80/20.
Even then, however, it becomes a question of individual perspectives and different business models. One adviser, for example, commented:
“Forget 80% upfront commissions. That takes us back to only “marginally viable”. Sustainability with growth of the industry is what’s needed.”
The same adviser said 100% upfront commission with 20% renewals will ensure:
- New risk advisers entering the industry will be able to see a future
- Existing experienced advisers will be retained and will grow their business
Taking a broader perspective, another adviser commented that what he says is the obvious first step is to guarantee commissions as a income source and then to make commissions sufficient to allow advice practices to write and retain insurance premiums.
He added that the solution is simple: “What we need is for the people who make decisions to start LISTENING and ACT.”
What’s your solution to the question? What will it take? Our poll remains open for another week and we welcome your thoughts…
There are 2 parts to this conversation.
1) What income do I need to make it viable to provide risk Advice in todays current regulatory and administrative environment.
2) What is the required numbers of Advisers needed to make it a viable Business model for Life Insurance Companies to invest and stay around for the long haul, so they can continue to pay commissions in order for us all to have viable risk Businesses and for our clients to get more certainty with affordable, quality Insurance products.
We all tend to focus on our needs first and that is important, due to minor things like having to pay bills, staff, put a roof over our heads, feed ourselves, etc.
However, we all need to also look at the BIG picture and take a look at another crucial element to all our survival, which is to make it attractive enough for NEW people to become INTERESTED enough to want to look at a career as a risk Adviser.
As more older Advisers retire, or leave due to it being too hard to continue, or even recruit and train up new Advisers, then the end result will be a continued path to the cliff edge.
Life Insurance Companies make up shortfalls in premium revenues, by increasing existing customers premiums, which works in the short term, though will fail in the long term.
The longer it takes to realise that the best way to fix the issues, is to make it easier for NEW people to join and for experienced people to stay and help rebuild, then the never ending cycle of premium hikes will continue until the bubble bursts and the Industry is in big trouble.
Well said Jeremy. I would agree strongly with your last few words, “the industry is in big trouble”. At this late stage it would take a herculean effort from someone with the foresight, tenacity and resolve of Paul Volker fixing inflation in the 80s to turn this debacle of an industry around. Such a person does not seem to exist in our industry or politics today, sadly.
The life companies didn’t legislate to create this bedlam but they sat ’round idly while clueless self-absorbed politicians did. Why? Because they wrongly thought there was a quid in it for the life companies and they wrongly assumed advisers would go quietly into the night and cop 60/20 and 2 year writebacks. This was an insult to advisers beyond any previous comprehension.
How wrong the companies were. This idiocy can be reversed but it won’t be – life companies either haven’t got the stones to get it done OR they think they will still get away with it – shafting their advisers – and are in heavy denial. Either way, they are NOT entities with whom any self respecting and clear thinking adviser would want to call a business ‘partner’. At least not until they change and apologize for their abhorrent behaviour.
I won’t be surprised whatsoever if, by EOFY 2027, there are life companies making formal representation to the government to change legislation to allow access their hallowed statutory funds for continued survival. I am not talking about paying claims. I’m talking about running their businesses. Premium income will dry up and they will have no recourse. No business can survive without income flow and advisers are the ones that ensure that for life groups. What boggles my mind is they don’t seem to acknowledge that and seem to view themselves as a power unto themselves, not at all dependent on advisers. Go figure!
Mark my words, from 2027 some of the most untoward things will be happening with life offices, things beyond unthinkable just 5 years ago – or even now. Accessing stat funds for their very survival will only be the beginning. Just wait until they can’t pay claims!
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