has announced reforms to payment structures, which will reduce upfront commissions on all life insurance policies.
This announcement comes the Trowbridge Report, released last month, sounded the alarm on commission structures in the life insurance advice, recommending that the industry introduces a $1,200 cap on upfront commissions and limits remuneration to a 20% level commission.
The Trowbridge Report was produced in response to an ASIC review of retail life insurance advice conducted in October, which found that more than a third (37%) of the advice consumers received failed to comply with regulation governing a consumer’s best interest.
AMP is reducing upfront commissions paid to advisers on new life insurance products through a new payment structure. The model caps year one commissions paid on life insurance policies to 80% and a 20% annual commission payment during the life of the policy.
“It is clear the Australian life insurance industry needs to reform in order to help restore customer confidence,” said AMP chief executive Craig Meller.
“This confidence is essential for AMP to achieve its most important objective – offer financial advice to help people improve their lives. These changes, which are initial steps towards a fee for service model, support this objective.
“AMP and its licensees will also work closely with regulators, business partners and the industry to identify further opportunities for reform, in line with the direction and intent of the Trowbridge Report. Part of this process will be assessing the impact these changes have on customers and advisers, many of whom are small business owners.”
Earlier this month, Mortgage Choice
denounced recommendations calling for an overhaul of “conflicted” commissions in the life insurance sector. Mortgage Choice Financial Planning’s general manager Tania Milnes said the proposed recommendation could potentially harm consumers.
“While Mortgage Choice is extremely supportive of the need for change, highlighted by the fact that we have already mandated a hybrid commission model, if Mr Trowbridge’s specific recommendations relating to adviser remuneration are ratified it would make life insurance more expensive for Australian consumers. And as a result, fewer Australians would be able to access affordable insurance-related financial advice,” she said.