08 November 2017
From 1 January 2018, the new Life Insurance Framework (LIF) remuneration rules will be implemented across the industry.
Below is the second in our series of updates on the new LIF rules and how it relates to your experience with AIA Australia and Priority Protection and Priority Protection for Platform Investors.
From 1 January 2018, AIA Australia’s commission rates will be adjusted in line with the LIF rules. AIA Australia has taken this opportunity to improve our commission rates where premiums are dialled down. We have also increased the premium discount when full commission is dialled down from 25% to 30%. This means an extra 5% discount for your clients if you choose to dial your commission down to $0 and opt for fee for service.
The table below shows the new remuneration rates for the Priority Protection range of products from 1 January 2018 (inclusive of GST). Please note that these rates will be adjusted in January 2019 in line with the LIF rules.
| Premium Discount | Upfront 2018 | Level | |
|---|---|---|---|
| +5% | Year 1 | N/A | 31.13% |
| Year 2 | N/A | 31.13% | |
| Year 3+ | N/A |
31.13% |
|
| Standard | Year 1 | 88.00% | 30.00% |
| Year 2+ | 22.00% | 30.00% | |
| -5% | Year 1 | 65.00% | 23.10% |
| Year 2+ | 20.00% | 23.10% | |
| -10% | Year 1 | 55.00% | 18.37% |
| Year 2+ | 15.00% | 18.37% | |
| -15% | Year 1 | 40.00% | 12.87% |
| Year 2+ | 12.00% | 12.87% | |
| -20% | Year 1 | 20.00% | 9.13% |
| Year 2+ | 8.00% | 9.13% | |
| -30% | Year 1 | 0.00% | 0.00% |
| Year 2+ | 0.00% | 0.00% | |
| Upfront 2018 | Level | ||
|---|---|---|---|
| Term Cover (10-year) | Year 1 | 55.0% | 27.5% |
| Year 2+ | 22.0% | 27.5% | |
| Term Cover (5-year) | Year 1 | 44.0% | 22.0% |
| Year 2+ | 14.3% | 22.0% | |
Increases to Policy Cost
AIA Australia will continue to pay commission on an increase to policy cost resulting from an increase to the sum insured.
Decreases to Policy Cost
If there is a decrease to the policy cost, commission will be clawed back proportionally, if the decrease occurs within the clawback period.
Grandfathering Rules
The following policies will be grandfathered under the LIF rules.
Policies issued on or after 1 January 2018 will be grandfathered for LIF purposes if the:
AND
Where a Policy is grandfathered for LIF purposes, any additions to the same policy will also be grandfathered.
Any grandfathered policy which is cancelled and replaced on or after 1 January 2018 will no longer be grandfathered for LIF purposes.
Clawback Rules
Grandfathered Policies:
Our existing 12 month clawback rules will continue to apply to grandfathered policies (and additions to grandfathered policies).
Policies not Grandfathered:
There will be a two year clawback period for all policies not grandfathered. This clawback period applies to any commission paid on the original sum insured and any additions made in the first two years.
Any commission paid on additions to a policy after the two year clawback period has ended will be subject to our existing 12 month clawback rules.
Upfront commission clawbacks:
| Cancellation or reduction during clawback period and within the first 12 months following payment | 100% |
| Cancellation or reduction during clawback period and after the first 12 months following payment | 60% |
