Recently a few insurance companies have stepped up to support risk commissions as a valid form of remuneration for advisers. The insurers are taking a stand in the face of Royal Commission proposals that may see commissions scrapped in favour of fee-for-service models, to avoid perceived or real conflict of interests in the industry.
ClearView stands up for commissions
ClearView made a statement in favour of risk commissions, with ClearView’s managing director Simon Swanson saying that while the company supports the broader goals of the Royal Commission, some elements were worth protecting - such as risk commissions. These commissions are paid by companies like ClearView to financial advisers.
Swanson discusses ‘real life’, and how insurance doesn’t fit into the perfect world where consumers would pay upfront fees for a financial product that may not show any benefit for decades.
TAL joins in
TAL has also joined the chorus, with TAL’s Group chief executive and managing director Brett Clark saying a balanced consideration of the issues is required. Clark says that the discussion around commissions needs to be ‘more sophisticated’ than just simply which model is ‘better’. There are a number of factors Clark notes when debating commissions, including consumer access to advice, supply of advice, payments that ensure consumer confidence, and minimising conflicts or risks.
Labor reaffirms position on commissions
The Federal Opposition has confirmed its intention to completely ban risk commissions after the 2021 review of the impact of the LIfe Insurance Framework reforms. ASIC, in its 2021 review, will consider whether there is any justification for retaining risk commissions. There are many possible outcomes, with adjustments to the commission structure, banning of all commissions, or retaining commissions as they are.
Consultation is now open for the Federal Government’s response to Commissioner Kenneth Hayne’s recommendation that grandfathered conflicted remuneration be banned. Consultations close on April 25.