Embracing Change
Jon-Paul Hale runs the rule over insurer's change of servicing requirements.
Monday, November 3rd 2025, 7:39PM
by Jon-Paul Hale
I've been waiting to see how change of servicing is going to be managed by the various providers.
Asteron Life's update to their agency agreement now aligns with half of the industry providers, introducing a process for moving servicing and renewal commissions to the servicing adviser.
I'm not slating the change; rather, it is about time!
However, two of the changes Asteron Life have made have triggered some rethink about how we engage and operate.
The two changes relate to service commissions and client privacy, two hot topics from many directions, including our regulator.
I'm going to tackle the change of servicing one first, because it has financial implications beyond the agency update distribution list.
The agency agreement change is at the FAP - Asteron Life level; it wasn't directly communicated to Financial Advisers under their FAP unless the FAP has passed it on.
What is the change:
- The new servicing adviser can now force the purchase of client renewals. Submitting a change of servicing adviser to Asteron Life, along with the request to purchase, is the trigger.
- Where, after 60 days, if there is no Sale & Purchase agreement between the old and new adviser, Asteron Life will effect the change by debiting the new adviser the value of the contract, crediting the old adviser for the contract, and moving servicing for both information and renewals to the new adviser. This is much the same as the Partners Life approach introduced a few years ago.
- There is a value calculation included, which I'm not going to dig into much, as it's a calculation, and it doesn't have anything particularly concerning.
While the intent of this is exactly what one would expect, and what the regulator will be happy to see, there are a couple of considerations with the approach we now have from Partners Life and Asteron Life.
These changes will affect the industry and how it operates.
I don't think it will undermine the value of our client bases; rather, it reflects a value that is more formally recognised.
However, the approach by the two life insurers so far effectively sets the value of a contract, as they have similar calculations. The clauses list market value in both agency agreements and help establish the value of a contract, so it is not always going to be 3 or 3.5 times annual renewals.
When it comes to change of servicing a significant portion of servicing adviser change appears to be older clients. Where their adviser has retired and sold their client base to someone they don't like, or they have got fed up with their adviser and want a change.
These clients bring with them business risk for the adviser, not just advice risk, but financial when purchasing contracts.
Where the client is older and has disability and trauma benefits, they may be of an age where these things start to get trimmed back or dropped off.
Age 65 & 70 for disability covers, age 70 but before age 100 for some trauma covers, with those over 50 often trimming benefits before they expire.
The longevity of the remaining benefits needs to be considered with the valuations being used.
Relying on the insurer to get this right may be fraught, because the new adviser generally has a better idea about the client's intent for their cover and their capacity to continue paying for it.
There is the ever-present issue of "I'm at risk of drop off for three years purchasing, but only two if I move them." With both risks diminishing over time.
nib, as I have said before, has an elegant approach that is more than fair.
- But it seems to have a problem where some advisers are both taking the servicing with service renewals in three years, and charging clients fees for advice.
- If you're one of these advisers, you're not working to the intent of the process. You're not getting renewals because they are paying the old adviser on your behalf for them!
- It is patently unfair to the client to charge them fees because you're not getting paid, when it is because there is effectively an offset of the renewals for the purchase of them!
- There is a consideration around this that the events so far in October suggest there is more change to come on this subject.
The above issue aside, I still feel the nib approach is the most appropriate and fairest for all.
It has one challenge the providers don't like: system changes that are needed to track changes of servicing and paying the appropriate advisers along the way. Including potentially multiple change of servicing that overlaps within the three-year period(s).
The nib approach is elegant and simple:
- The renewal continues to be paid to the existing adviser for three years.
- It includes the ups and downs the client makes, or would have made without a change of servicing (the client typically asked for help in some way).
- It also includes the increases related to premium increases for the existing adviser. 22-33.6% this year alone with nib! The S&P process above doesn't provide for this.
- If the policy goes the three years, then the old adviser has received their value, potentially more than they would have if the client had received no service or cancelled outright.
- Yes, I am saying no service from the old adviser. Clients receiving service generally do not change advisers.
- For the new adviser, they have to provide service without remuneration for three years. However, they do their penance, they receive the ongoing rewards.
- The new adviser is not out of pocket with the sale & purchase process, and doesn't have the disincentive to replace or not provide service to the client due to upfront purchase costs.
- But there is the incentive for the new adviser to engage in a sale & purchase as the nib process drops renewal commission to 5% if the policy is on a higher renewal value that is preserved with the direct adviser level sale & purchase process.
- The client isn't put into a position of potentially being liable for the adviser's purchase of them with additional fees (charged or deferred), potentially avoiding them disengaging and going it alone without an adviser's help.
- The nib approach reduces replacement and supports improved persistency of client bases, which helps everyone when it comes to premium pooling and managing costs.
- Replacement has a significant cost burden on the industry, where the replacement is often poorly justified and tenuous on real long-term client advantage.
- Yes, I'm still having lots of discussions where the BRA justification is "better price". Do better people!
The transition from the old sales industry to advice profession needs to include these conversations within the industry, with clients, and with those overseeing things.
While I can see some challenges here for all, the inclusion of servicing renewal change is a good thing for the progression of our profession. Now for the rest to join the party!
If the whole industry adopted the same process as nib we would have significantly more stable client bases that we are paid to service with reduced incentives to unnecessarily replace benefits.
The Fire & General world already mostly does this, but their contracts are annual. Our contracts are automatically renewable and have a long tail, thus they have a higher multiple of renewal for value.
- The nib approach preserves the value of our client bases, in some ways increases it if Southern Cross and UniMed adopt a similar approach and vest the client relationship to the FAP.
- Presently, they move servicing commissions/fees on the change of servicing.
I have no trouble with setting the value of client contracts at around three times renewals, because it brings with it other benefits that are not just revenue.
Stabilised value of client bases benefits all of our businesses. It provides a basis for lenders to support businesses that want to grow that need money. Something missing in our space if you don't own a house.
With home ownership on the decline, we also need alternative funding pathways for new blood into existing businesses.
Like I said, this is about engaging in a conversation about financial advice as a profession.
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