[Opinion] Risk commission future not all gloom and doom

There is much wailing and gnashing of teeth on this side of the Tasman over recent decisions about risk adviser commission in Australia.

As I understand it, following a phase-in period of three years, up front commission on new business will be limited to 60% of the first year’s premium, renewal commission will be limited to 20%, and the adviser will have a three year responsibility period during which claw back of commission can be made.

Personally I think that’s not a bad outcome, as strange as that may seem. Sure, the 60% up front is a bit harsh, and maybe here in NZ we will come up with a somewhat higher figure. But the 20% renewal is excellent for building long term value in the adviser’s business. In fact it is very similar to the amount of renewal commission for a fire and general book in NZ.

During my 37 years as an adviser, the highest commission rate I ever received was 90%, from one insurer. All the others offered lower rates than this. And we did OK, in fact along with many other advisers, we achieved the MDRT qualification level on several occasions despite these relatively low commission rates (MDRT qualification is based on new business commission rather than API).