- Yes (84%)
- No (9%)
- Not sure (7%)
Our latest poll seeks your view on the change to the LIF commission structure proposed by John Trowbridge.
As we’ve reported this week, the Independent Chair of the 2015 Life Insurance and Advice Working Group has called for a minimum commission payment to underpin advice on smaller premium life insurance business, mostly provided to consumers earning low-middle incomes (see: Renewed Call to Review LIF Commission Structure).
The intention of this poll is to seek your opinion on whether you agree with the principle of Trowbridge’s proposition, namely a minimum commission being paid to advisers regardless of the client’s annual premium. The question of how much that minimum commission payment should be, and to what minimum premium level it should apply are questions for another conversation.
…it is simply uneconomical for any financial adviser remunerated via commission to advise younger and/or lower-income Australians
Trowbridge’s renewed call to do something about the LIF commission caps in their current format is informed to a large extent by the fact that it is simply uneconomical for any financial adviser remunerated via commission to advise younger and/or lower-income Australians where their annual premium level won’t generate sufficient commission income.
…the cost to serve, combined with the 60/20 commission caps is a sum which doesn’t add up
In other words, the cost to serve, combined with the 60/20 commission caps is a sum which doesn’t add up (it never has), and where lower-income Australians have become the victims of this equation.
So, what should be done about it? FAAA GM Policy, Advocacy and Standards, Phil Anderson, is advocating for an increase to 80/20 (see: Anderson Calls for 80/20), and we’ve run previous polls seeking your opinion on this proposal (see: Poll Result – 60/20 Not Enough). Trowbridge, on the other hand, is proposing an alternative structure.
Both these proposed solutions would deliver a more attractive commercial proposition for advisers and advice practices, while at the same time extend the reach of much-needed life insurance solutions to younger and lower-income Aussies who are currently ‘commercially unviable’ clients for advisers.
Once again, this poll is seeking your opinion on the principle of Trowbridge’s proposal, rather than the numbers at which the minimum commission payment should kick-in. That will form part of future questions we’ll be asking you.
Tell us what you think and we’ll come back to you next week…
88:22 was previously and still is sustainable
With the compliance and red tape load on advisers for delivering even the simplest personal advice, only 100/20 will suffice in the current environment if old advisers are to be retained, new advisers attracted and any chance of breathing life into our once great industry exists. The time when 88/22 or even 100/10 was acceptable has gone. Advisers won't return to the risk space until red tape is gone or commissions are at 100/20 to justify it.
The government should just stay out of pricing (mandating upfront commissions, trail commissions and clawbacks) as well as product (Bulls**t IDII contracts and no more Agreed Value Income Protection, thereby causing existing clients with Agreed Value IP policies to have their premiums increase become no new inflows can enter the pool as the pool ages) and just leave pricing and product innovation to the free market forces of supply and demand (between insurers, advisers and lives insured).
However the government should be able to influence policy.
As an example, I wrote in to the Royal Commission and suggested that all advisers should have been required to ask their clients for how many years they wanted to hold on to their insurances (Life, TPD, Trauma &IP) and if the answer was more than 15 or 20 years (eg till retirement at 60, 65 or 70), then the government policy COULD have been that advisers were required as a default to recommend Level premiums but could provide a justification if they wanted to recommend Stepped premiums. This would have solved the alleged "churning" issue and made it profitable for insurers.
… well that horse has bolted hasn't it?!
The principle still remains, the government should stay out of pricing and product and throw LIF on the scrapheap of STOOOOPID IDEAS conjured up by salaried bureaucrats and academics in their ivory towers rather than practising life insurance advisers in the real world.
Let insurers, set their own upfront commissions, trail commissions and clawbacks WITHOUT COLLUSION (in accordance to the Trade Practices Act) and the government policy can be that advisers have to provide a document that must be initialed by the client that shows the Commissions (upfront and trail) and clawbacks of all life insurance companies and the insurance company (and their commission payments) their adviser is recommending, thereby triggering a discussion both with the clients as well as the compliance team if it appears that the adviser is acting in their own interest rather than the client's best interest.
The other data point that should be disclosed to clients premium stability over the last 10 years for stepped, level and optimum (or any other hybrid premiums unique to that insurer in table and graphical format) and allow free market economics to run its course.
There is still time yet to save the insurance industry in Australia by adhering to the principle of "Government can only influence policy and not price or product"!
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