Latest Poll – Capped Commissions Coming to NZ?

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Should up-front life insurance commissions be capped?

  • No 
 (65%)
  • Yes (29%)
  • Not sure (6%)

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The Government is considering capping up-front life insurance commissions and potentially trail too, as detailed in an options paper for its Conduct of Financial Institutions review (see: Government Considers Capping Commissions…).

In the options paper, the Government stated capping upfront commissions could help reduce the the likelihood of behaviour that drives poor customer outcomes.

“Some commission structures can incentivise conduct that is not in the customer’s interest. For example, high upfront commissions can incentivise advisers to ‘churn’ existing customers from one product to another in order to receive another upfront commission. This can drive poor conduct and result in poor customer outcomes,” the report stated.

It referred to the cap on commission already in place in Australia by the Australian Securities and Investments Commission which involves an upfront commission cap of 80% with a maximum trail commission of 20% from 1 January 2018, with a reduction to 70% upfront and 20% trail from 1 January 2019, and further reduced to 60% upfront and 20% trail from 1 January 2020.

In a poll last year in June, we asked you whether life insurance commissions were too high in New Zealand (click here).

Interestingly, 75 percent of respondents thought the present levels are were appropriate but 21 percent thought commissions were too high.

So, where do you stand with capping life insurance commissions and how will your advice business be impacted by such a cap? Do you think the Government is taking a reasonable approach to improving good customer outcomes or going a step too far?

Take a vote in the poll and we’ll report back to you next week with the results…