Australia will allow commission to be paid on life insurance policies but they will be regulated and lower than the rates paid previously.
The proposed reforms for adviser remuneration in the retail life insurance industry include:
Maximum total upfront commission of 60% of the premium in the first year of the policy, from 1 July 2018, with transitional arrangements to gradually reduce the upfront commission taking effect from 1 January 2016.
Maximum ongoing commission of 20% of the premium in all subsequent years from 1 January 2016.
Three-year retention (‘clawback’) period, to commence from 1 January 2016 ranging from 100% clawback of the commission on the first year’s premium in the first year of the policy to 60% in the second year and 30% in the third year.
Ban on other volume-based payments from 1 July 2016, with appropriate grandfathering arrangements.
Life insurance companies to offer fee-for-service insurance products to support advisers who wish to operate on a fee-for-service basis.