AMP has moved to a hybrid commission model for life insurance products, in a move its chief executive hopes will help “restore consumer confidence” in the sector.
Yesterday the company announced it will change its current life insurance remuneration policy for financial planners aligned to AMP-owned licensees as well as other advisers recommending AMP insurance products.
Under the reforms, upfront commissions will be reduced in favour of a hybrid model in which “year one commissions paid on life insurance policies [will be capped at] 80 per cent and a 20 per cent annual commission payment during the life of the policy”.
Approved product lists of financial planning groups under the AMP banner will “move to a similar remuneration model” for all insurance products, including those issued by competitor providers, a statement from AMP explained.
“It is clear the Australian life insurance industry needs to reform in order to help restore customer confidence,” said AMP chief executive Craig Meller.
“This confidence is essential for AMP to achieve its most important objective – offer financial advice to help people improve their lives. These changes, which are initial steps towards a fee-for-service model, support this objective.
“AMP and its licensees will also work closely with regulators, business partners and the industry to identify further opportunities for reform, in line with the direction and intent of the Trowbridge Report. Part of this process will be assessing the impact these changes have on customers and advisers, many of whom are small business owners.”
The reforms come as AFA chief executive Brad Fox has called on licensees and financial planning companies to pre-empt any government response to the Trowbridge report by making changes to their risk remuneration modus operandi.
“I think it is totally conceivable that some licensees will seize on the opportunity to address consumer perceptions by mandating that their advisers accept no more than a hybrid payment,” Mr Fox said.
“I would not be surprised at all if we see announcements from licensees mandating new standards ahead of an industry-wide solution being agreed.”
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