Advisers are set to gain greater control over their insurance sales with more providers expected to follow Asteron Life’s decision to introduce a range of flexible commission options.
Asteron has announced it will give advisers a choice between a new customised commission rate, a new hybrid rate, and, for advisers looking to move to a full fee-for-service model, a new wholesale rate with built-in discounts.
The decision will provide advisers with 500 potential commission structures, and comes ahead of the introduction of the Life Insurance Framework from July 1, which caps commission rates.
Elixir Consulting’s Sue Viskovic says Asteron Life’s move puts the control and decision making around insurance pricing back in the hands of advisers. “The total flexibility is quite innovative,” she says.
Viskovic says that while insurance companies will be forced to change their models ahead of regulatory changes from July 1 this year, she expects other insurers to follow Asteron Life’s lead and introduce greater flexibility in their commission options as well. “It’s certainly the beginning of more to come,” she says.
Asteron Life’s executive manager, Mark Vilo, says the insurer had been talking with advisers for some time about remuneration in light of the imminent removal of upfront commissions.
More flexibility, more control
He says advisers wanted more flexibility and control over how they choose to price their advice and how that reflects on customer premiums.
Vilo says until July 1, advisers can maintain the traditional model of 110 per cent commission in year one and 11 per cent ongoing, or an 80 per cent commission in year one and 20 per cent ongoing.
But Asteron has now introduced a “first-to-market” customised rate that allows advisers to adjust commission rates and client premiums throughout the life of the policy.
Vilo says Asteron’s innovation allows advisers to choose their remuneration not only in the first year, but in subsequent years.
Under the new structure, advisers can select a commission of up to 88 per cent in the first year and up to 22 per cent ongoing. Depending on the commission choice, clients may also get premium discounts of up to 25 per cent.
Vilo says advisers have a choice of up to 500 different commission structures, which will allow them to introduce fees. An adviser for example could choose no commission in the first year, charge the client a fee, and then earn a 10 per cent commission in subsequent years
Play around with options
He expects advisers will start to play around with options, and most will likely start using both fees and commissions. “There will be a transition,” Vilo says. “They’re not just going to turn off the commission switch and start charging a fee. We will see a lot more advisers working with a combination of commissions and fees.”
Asteron Life has also introduced a new “no commission” wholesale rate. “For advisers interested in moving to a full fee-for-service model we’ve released a new wholesale rate with a built-in 25 per cent discount and an additional 15 per cent for new clients in the first year,” Vilo says.
Viskovic says while some other providers already provide wholesale pricing the 15 per cent discount in the first year is innovative. “That extra discount will help allay client concerns about the extra cost they will pay in the first year to get good advice and establish their policy,” she says.
Rates aligned
Asteron Life also aligned its new hybrid rate with the proposed 88/22 “so that advisers transitioning away from upfront commissions can set their business up for July 1 when it comes into effect as part of new regulation”.
Vilo says he can’t comment on other insurer’s moves, but he says most will be thinking about designing a similar style of offer to Asteron Life’s. “With all the change in the market at the moment, there is going to be a need for a lot of new thinking around how our industry supports advisers,” he says. “This is one example of how we’re trying to look for alternatives for advisers to use, given what’s imminent from July 1.”
