Minister Jones rejects life commission cap increase

Current levels are 60 per cent for upfront commissions and 20 per cent for trailing commissions, with a two-year clawback, with the government’s first tranche of legislation in response to the Quality of Advice Review, released last week, confirming commissions are set to remain unchanged.

Namely, the government last week presented draft law for recommendations 13.7 to 13.9, which relates to obtaining consent for life insurance, general insurance, and consumer credit insurance commissions.

The draft legislation proposes to retain all of the current caps on commissions and seeks to enshrine in law the requirement for advisers to seek one-off consent from their clients, in writing, to receive a commission.

Speaking on the matter on Wednesday, Financial Services Minister Stephen Jones said an increase in life insurance caps is “not something that is on our agenda”.

“It’s not even in the in-tray,” the minister added.

“Look at what is in the in-tray, and there’s a lot.”

The retention of current commission levels was called for in the QAR by reviewer Michelle Levy, who said at the time that an increase would only up costs for insurers and would therefore have an impact on premiums.

Speaking to ifa on Tuesday, Adam Crabbe, risk strategy specialist at Zurich, said that while he is aware that advisers would prefer a boost in commission caps, by reducing the regulatory burden on advisers, the QAR should reignite interest in life insurance advice.

“With that reduced complexity, it’s a reduced cost to serve, so there’s perhaps a greater willingness to re-enter [risk advice],” Mr Crabbe said.

Numbers don’t worry the minister

Mr Jones, however, doesn’t appear too concerned about the exodus of specialist, life insurance-focused advisers.

On Wednesday, he told the media that there’s been a pattern in Australia regarding the decline in retail-driven life insurance.

“It’s not my job as the minister to tell life insurers how they go out there and promote their products and increase their market. It is my job as a minister to remove obstacles that make no sense and provide no consumer protection and that’s what I’m focused on,” he said.

Specifically on the large exodus of advisers, including from the risk advice space, he said: “We talk a lot about the 10 or 14 thousand advisers who have left the industry, it would be a mistake to assume that every single one of those was a national tragedy. The world has changed, we’ve had the royal commission, and we’ve had several inquiries.”

Regarding the regulation that has contributed to this exodus, the minister assured he is “looking at it” to discern how much of it is pro-consumer.

“That’s what I’m focused on, it’s not my job to go to anyone in particular and say, ‘This is how you promote your products to the market’.”

According to recent data from Adviser Ratings, the total pool of advisers who wrote life policies stood at 6,373 in the six months to 30 June 2023. However, pure risk advisers are said to number 150.