The existing Life Insurance Framework (LIF), which sets a 60% upfront commission cap and a 20% ongoing cap, was implemented by the erstwhile Coalition government. Despite nearly eight years having passed since its introduction, many industry experts are now questioning its continued relevance and effectiveness.
Nathan Rees, head of external affairs and public policy at MetLife Australia and former Premier of New South Wales, has been vocal about the limitations imposed by these caps. Speaking at the Professional Planner Advice Policy Summit, Rees stated, "Getting rid of caps is part of making things more affordable. It's not a silver bullet, but it's part of a suite of solutions." He further argued against government-determined pricing, saying, "I cannot think of another legitimate product where distribution pricing is government-regulated."
Rees's position has found support from other political figures, including Bert van Manen, a former financial adviser and current Coalition member. Van Manen argues for a more flexible system, pointing out discrepancies with other financial sectors. "You charge a fee that you agree to with your client – why isn't that the same on the insurance side, whether it’s a fee or commission?" he queried.
The subject of commission caps was further analysed through a Slido poll during the summit, where 53% of financial services delegates favoured either raising the cap to an 80/20 model or maintaining a lower cap. A minority, 12%, suggested banning commissions altogether.
Van Manen believes an 80/20 model would be merely a starting point, articulating a vision where such caps are abolished entirely. Reflecting on his earlier legislative efforts, he stated, "I spoke against the original legislation when we introduced it back in 2015. Disappointingly, I lost that argument. However, many of the arguments I put forward are now proving valid."
Sam Perera, director of Perera Crowther Financial Services, noted the necessity of reviewing the existing remuneration model in light of current challenges in the life insurance landscape. "The sooner we accept that, the sooner we can design a framework that benefits everyone," he remarked.
Furthermore, as the Labor government rolls out the Delivering Better Financial Outcomes reforms, introducing a new adviser tier, the industry stands at a crossroads. Christine Cupitt, CEO of the Council of Australian Life Insurers, expressed cautious support for the new class of advisers, emphasising the need for "all the right consumer protections and guardrails."
Cupitt suggested that the naming of the new adviser class should change to better reflect their role, proposing terms like 'consultant,' 'provider,' or 'agent,' rather than financial adviser. Meanwhile, Perera conveyed his support for Non-Commissioned Advisers (NCAs), believing their incorporation would broaden insurance access, though he urged for a tempered approach to ensure adequate safeguards are built.
Ultimately, the debate on commission caps is part of a broader conversation about the role of financial advisers and how best to serve the needs of Australians within the evolving insurance landscape. Industry leaders and policymakers are recognising the imperative for updating models to ensure sustainability and growth.
Published:Sunday, 16th Feb 2025
Source: Paige Estritori
![]() | Landmark Court Ruling Challenges Insurance Exclusion Clauses 19 Feb 2025: Paige Estritori An Australian court has rendered a pivotal decision in a complex insurance case featuring Mr R's Total and Permanent Disability (TPD) claim which was initially denied by the insurer due to a contested exclusion clause related to pre-existing conditions involving neck and shoulder injuries. - read more |
![]() | Rising Insurance Premiums: A Looming Crisis for Australian Households 18 Feb 2025: Paige Estritori The insurance landscape in Australia is becoming increasingly fraught as the cost of home insurance continues to climb. Recent findings have shed light on the financial strain experienced by 1.6 million households due to surging insurance expenses. Alarmingly, this figure marks an increase of 360,000 households compared to the previous year, underscoring a 30% rise in those affected by these financial burdens. - read more |
![]() | AFCA Backs Policyholder in Stolen Car Dispute 17 Feb 2025: Paige Estritori In a recent ruling, the Australian Financial Complaints Authority (AFCA) sided with a motor insurance policyholder, awarding her the full value of her stolen vehicle alongside $3000 for non-financial losses, dismissing the insurer's fraud accusations. - read more |
![]() | Debate Heats Up Over Risk Commission Caps in Insurance 16 Feb 2025: Paige Estritori In light of recent discussions within Australia's financial sector, notable figures from both the Coalition and Labor are advocating for the removal of risk insurance commission caps. This policy adjustment could potentially reshape the landscape for life insurance advisers across the nation. - read more |
![]() | Business Relief as Insurance Rates Decline Worldwide 11 Feb 2025: Paige Estritori In a new development that could signal relief for global businesses, the latest data from Marsh's commercial price monitor indicates a broad decline in insurance rates during the last quarter of 2025. This trend is especially marked in the Australia-Pacific region, which experienced an 8% reduction, making it the standout market globally. - read more |
![]() | Income Protection Insurance Explained: Ensure Your Livelihood in Times of Uncertainty When life takes an unexpected turn, whether due to illness, injury, or other unforeseen events, the financial repercussions can be devastating. This is where income protection insurance becomes an essential component of maintaining financial stability. Income protection insurance acts as a safety net, ensuring that even in times of hardship, your financial obligations can be met, and your standard of living maintained. - read more
|
![]() | Combining Financial Security and Affordability: Income Protection for Australians Explained Financial security is a cornerstone of peace of mind, particularly when life is known for its unpredictability. This introductory section sheds light on the vital nature of income protection insurance and its role in safeguarding Australians' financial well-being. Ensuring continual financial inflow during times of illness or injury not only offers stability but also protects one's standard of living. - read more
|
![]() | Income Protection Insurance and Tax Benefits: What You Should Know Income protection insurance is a type of cover designed to provide you with a safety net if you are unable to work due to illness or injury. By offering regular payments that replace a portion of your income, it helps ensure that you can maintain your lifestyle and cover essential expenses during challenging times. - read more
|
![]() | Why Income Protection Insurance Is Essential for Australians Income protection insurance is a type of personal insurance that provides financial support if you are unable to work due to illness or injury. It ensures that you continue to receive a portion of your income, helping you manage daily expenses and financial commitments during recovery. - read more
|
![]() | Income Safety Net: How to Choose the Right Income Protection for Your Lifestyle In the face of life's unpredictable twists and turns, few things are as disconcerting as the possibility of suddenly losing your ability to earn an income due to illness. Such events are often unexpected and can have significant financial repercussions that interrupt not only your flow of daily life but also compromise your future plans. - read more
|
![]() |
5 Key Factors to Consider When Shopping for Income Protection in Australia Welcome to our comprehensive guide on securing your financial future in Australia. In a world of uncertainties, income protection insurance plays a critical role in maintaining your financial security and peace of mind. - read more
|
![]() |
From Illness to Injury: Understanding the Scope of Income Protection Insurance In the uncertain times we face today, where both health and economic climates are unpredictable, safeguarding your financial stability becomes paramount. This is where income protection insurance steps in as an essential safety net. For many Australian families, it's the buffer that ensures life's financial commitments are met, even when ability to work is compromised. - read more
|
![]() |
Why Income Protection Insurance Is Essential for Australians Income protection insurance is a type of personal insurance that provides financial support if you are unable to work due to illness or injury. It ensures that you continue to receive a portion of your income, helping you manage daily expenses and financial commitments during recovery. - read more
|
![]() |
Income Protection vs. Life Insurance: What's Best for You? Financial protection is an essential aspect of sound financial planning. It ensures that you and your family are safeguarded against unexpected events that could lead to financial hardship. Two common types of financial protection are income protection insurance and life insurance. - read more
|
![]() |
Finding Accidental Coverage When Comprehensive Income Protection Isn't an Option Income protection is an integral part of maintaining your financial security, especially in the event that unforeseen illnesses or injuries prevent you from working. Enabling you to receive a percentage of your regular income, this type of insurance provides a safety net, ensuring that you can continue to cover your living expenses and financial obligations whilst recovering. - read more
|