New legislation designed to stop financial advisers pocketing large commissions from life insurance policies could help consumers save money – but you’ll have to wait to see any benefits from this change.
You may not realise that when you buy a life insurance policy, your financial advisor earns an upfront commission for helping you sign up, and this can be as much as 130 per cent of the value of the first year’s premium.
However, new legislation, which cuts that figure down to a maximum of 60 per cent and restricts trailing commissions to 20 per cent is currently before Parliament and could change all that.
While the strong support by the ALP makes it likely that the legislation will become law, the change may not come into effect until 1 January 2020.
Not everyone is throwing their support behind the legislation change. Greens Treasury spokesperson Peter Whish-Wilson said “we’re leaning towards supporting it. But we’re still having consultations and it will ultimately have to be decided in the party room”.
Consumer advocacy group CHOICE is also on the fence. “It’s an important first step and a big change because currently commissions can be as high as 130 per cent. But we think no commissions are acceptable as research clearly shows they are harmful for consumers,” says Campaign chief Erin Turner.
Revenue and Financial Services Minister Kelly O’Dwyer told Parliament that the legislation “will include clawback arrangement provisions under which part or all of the upfront commission will need to be repaid if the policy is cancelled or the premium reduces in the first two years.”
These clawback arrangement provisions would prevent greedy financial advisers from advising clients to change insurers every two years, each time pocketing another upfront commission for themselves.
What do you think? Would you welcome these changes to legislation? Are you happy with your life insurance policy?
Read more at thenewdaily.com.au
Related articles:
Tips for choosing a financial planner
Tips for reviewing your life insurance
Do you have the right super fund?
