Rice Warner says reduced life insurance commissions for advisers will have a huge impact.

“These changes should lead to more competition and reduced premium rates,” the actuary says in a new report.

Under the Life Insurance Framework upfront commissions will halve from the current 120% by 2018.

“This will affect all retail life business, including direct sales not using intermediaries,” the report says.

“We expect maximum commissions will become the standard default commission across the industry.”

Rice Warner says “many life advisers will moan” about the cut in upfront commissions, but the reforms also present opportunities.

“Smart dealer groups will realise that the higher renewal commissions (20%), being recurrent income for the practice, will add value to their businesses.”

Advisers currently receive 10-12% for renewal commissions.   

Banks will probably consider selling their life insurance businesses under the new framework, the reports says.

NAB sold MLC’s life insurance business to Nippon Life last month.

“It is likely more banks will follow the lead of NAB and exit the manufacture of life insurance to release capital,” Rice Warner says.

“Their customers will get better choice if more products are offered and the bank will take commission, which will be more stable income than profits on this business.”