Life Insurance Framework final phase reminder

The maximum allowable commission in relation to LIF policies (i.e. those which were not eligible for grandfathering prior to 2018) will be adjusted in line with the final phase of the LIF rules.

Commission is payable on the total annual premium excluding any policy fees, premium frequency charges, Government stamp duty and the AIA Vitality Contribution Fee (if applicable).

The above commission rates apply to new policies issued from 1 January 2020 as well as alterations made to any LIF policies on which AIA Australia pays new business commission. 

As was the case with the second implementation phase, the LIF regulations DO NOT allow for a grace period in which applications submitted but not issued in 2019 can upon issue, be paid commission at the 2019 maximum upfront commission rate of 77%.

As always, AIAs underwriting and administrative teams are working extremely hard to achieve a quick completion process. To maximise the opportunity for your client’s policy applications to be issued/completed by 31 December, please ensure you allow adequate time for this process if you wish for a policy to be issued prior to the end of 2019.

NOTE: Any policies issued in 2020 will be subject to the new 2020 commission maximums.

Remuneration paid under the level commission structure has not been impacted by the LIF changes:

• Current 30% (incl. GST) (subject to dial up/down) is still available
• Clawback period for new policies or increase/additions is 12 months from the date year one commission is paid on the original cover or increase/addition.

The two year clawback period for all policies not grandfathered prior to LIF and for which upfront commission is selected still applies. This clawback period applies from the date the policy is issued. However, where cover under a policy is backdated as a result of a client or adviser request, the clawback period will not apply from the backdated date. It will apply from the date on which AIA Australia made the decision to issue the policy.

Any commission paid on additions to a policy after the two year clawback period has ended will be subject to a 12 month clawback period.