Editor - Peter Sobels

Managing Editor – Peter Sobels


The life insurance sector is set to explode with reaction to the soon-to-be released Trowbridge Working Group recommendations. It seems almost certain Mr Trowbridge will advocate that high upfront commissions for life insurance advice should be consigned to history, and we can only speculate about other recommendations he may make.

Irrespective of the suggested way forward and the apparently sensible rationale for eliminating high upfront commissions, particularly given the findings by ASIC in its Review of Retail Life Insurance Advice, there will remain a significant proportion of dedicated advisers who will feel they’ve become victims of a process that has been brought on by the actions of a few.

While revelations about recent high-profile advice scandals have borne little connection with an adviser’s ability to access upfront commissions, it must still be acknowledged that any commission model is inherently conflicted if the amount of remuneration is linked to the level of cover recommended. And while the vast majority of advisers recommend their clients take appropriate levels of cover – cover that accords with the client’s best interests, there will always remain opposition in principle to commission because of its very nature.

I have previously argued for the retention of commissions and remain a strong advocate for it. Like the majority of the industry, I support a remuneration structure for life insurance advice that is appropriately regulated, which serves the best interests of consumers, but which also reflects the unique nature of the service as one that must be sold; not bought.

In a recent discussion I had with a general insurance broker, he scoffed at suggestions that life insurance focused advisers could not build a sustainable business based on a level commission model. From this broker’s viewpoint, the whole ‘sacred’ notion of the need for upfront or even hybrid commissions to sustain a risk-focused advice business was entirely cultural, pointing naturally to his own successful business, built on flat commissions, as an example.

There are some fundamental differences between life and general insurance products and processes, including the usually much-higher costs associated with placing one life insurance policy ‘on the books’, compared to a general insurance policy; the fact that the adviser may spend significant time working to insure his/her client, only to have their life insurance proposal declined; and the often substantial time and effort invested by the adviser and his/her support team at claim time.

So, I don’t hold to the notion that if a general insurance adviser can build a successful business on a 20% flat commission, then so can a life insurance adviser. The argument doesn’t stand up to scrutiny because, as I’ve outlined, the products and processes are different.

We’ll know in a few weeks from now about what Mr Trowbridge will recommend for the future of life insurance commissions. But whatever the outcome, both in terms of the recommendations and which of them will actually be implemented, financial advisers will continue to play a critically-important role in the future dissemination of life insurance solutions to Australians, and will continue to be remunerated in a way that reflects the value of their advice.


Peter Sobels

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