Life commission cap changes threat to advice businesses
One of the biggest threats to advice businesses and consumer access to life insurance advice is further changes to life insurance commission caps, according to ClearView.
Pointing to Investment Trend’s latest planner risk report, ClearView’s general manager strategy, Greg Martin said there was a particular need to ensure sustainable premiums and stable life insurance commission rates.
“More than half of all respondents listing additional caps or the end of life insurance commissions as their greatest concern,” Martin said.
“This reinforces proprietary research conducted by ClearView earlier this year which indicated that additional changes to life insurance commission rates would have a devastating impact on advisers and their ability to advise many consumers.”
Martin noted that advisers had already shifted their focus to more affluence clients to “break even” when giving personal advice.
The Investment Trends report found that the break even point for personal advice would increase to $1.03 million of cover per client compared to traditional levels of around $600,000 of cover per client.
The research also found that almost 40% of advisers reported a sharp decline in profitability in the past year, up from 18% in 2018.
Investment Trends said compliance obligations and the associate administration burden, followed by rising premiums and the flow on effect of the Royal Commission were the biggest challenges for advisers trying to grow their risk advice.
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