Assistant Treasurer Josh Frydenberg has acknowledged AMP's decision to drop upfront commissions as the right move, but has pointed out that "more needs to be done".
On Wednesday 29 April, AMP announced it will move to a hybrid commission model for advisers aligned to AMP-owned licensees as well as IFAs recommending AMP insurance products.
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”.
In addition, AMP will mandate that its advisers only be able to access the year one commission every five years per policy, “irrespective of the life insurance provider and applies to all insurance policies written since 1 July 2010”.
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.
However, speaking at an Australian Financial Review function in Sydney, Mr Frydenberg said the move does not absolve the life insurance industry of its woes.
"This is a move in the right direction but more needs to be done," the minister said.
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.
Meanwhile, Quantum Financial principal Tim Mackay has taken to social media to suggest other insurers may follow suit.
“Just [received] email from AMP re no more up front commissions from June 2015. Expect other insurers to follow suit. Hybrids comms cause churn too,” Mr Mackay tweeted.
“Can't wait to see how other insurers respond to AMP's move- case study in game theory. Will advisors cry collusion if all follow suit?”