Commission reforms went ‘halfway’: Trowbridge

One of the architects of the Life Insurance Framework (LIF) has pinned the blame for the burgeoning risk advice gap on the government, saying their reforms only went ‘halfway’.

John Trowbridge, the former independent chair of the life insurance and advice working group, warned that falling adviser numbers were creating a “crisis in the distribution of retail insurance”.

“What we’ve seen is a large decrease in the number of advisers in life insurance in the last couple of years,” Mr Trowbridge told the FSC’s life insurance summit. “…If life insurance is to be accessed properly by consumers it does need advice.”

Mr Trowbridge said that decreased commissions, along with rising compliance costs due to regulatory requirements, had “limited the ability of advisers to deal with their customers”.

“Advisers find that it costs them two to three thousand dollars, typically, to be able to prepare advice and get a customer on the books,” Mr Trowbridge said. “That’s OK if the commissions are high enough.

“What we recommended in the review of 2015 was that commissions come down but that there be an advice fee, which will give a lot more income to the adviser for the smaller premiums but limit it for the higher premiums.”


Advisers today do not get paid enough to advise smaller clients, which Mr Trowbridge said is “contrary to what we recommended”, and are now gravitating to the upper end of the market.

“(The government) simply halved the front-end commissions and increased the renewal commissions," Mr Trowbridge said. "...The outcome of the government going halfway on these commission reforms has created a big part of the problem with advice. The other big part is the huge obligations on advisers.

“This is a big problem for community access to the types of cover the life insurance industry is designed to offer and which, in my opinion, the community really needs and values of it’s done properly.”

Commission reforms went ‘halfway’: Trowbridge
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