Grim modelling on risk commission ban in superannuation
A Government's decision to ban risk commissions inside super would have a devastating impact on not only planner remuneration but levels of coverage, according to a new analysis published by specialist risk research company, DEXX&R.
The analysis, published this week, does not take account of the announcement by the Assistant Treasurer and Minister for Financial Services, Bill Shorten that the Government is prepared to cede ground with respect to commissions on individually-advised risk products, and paints a grim picture of the industry in the event of a total ban.
Shorten announced earlier this month that the Government might be prepared to revisit the question of a ban on individually-advised risk commissions, but has yet to formally declare a precise approach.
The DEXX&R modelling imposes a number of assumptions around the impact of a zero commission being payable on superannuation business including a 30per cent reduction in superannuation premium rates, a 50 per cent decline in adviser super new business from 2013, and a compensating increase in adviser ordinary new business as advisers recommend risk benefits be held as ordinary rather than superannuation business.
The modelling also assumes a compensating increase in adviser ordinary new business, replacing new business that would otherwise have been written under group super policies included in master funds and wrap accounts.
Utilising these assumptions, the DEXX&R research claims the projected outcome on individual lump sum business would be a decrease in each year from 2013, with the decrease in new premium in 213 being $31 million growing each year to a $183 million decrease in new premium in the 12 months ending 2020.
It then foreshadows a total decrease in new lump sum business between 2013 and 2020 to be $742 million with new business commissions projected to be $294 million lower by 2020.
The DEXX&R modelling forecasts a proportionately similar picture with respect to Individual Disability Income business.
AUTHOR
Mike Taylor
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