Insurers argue cutting commissions will lead to poor customer outcomes

The Ministry of Business, Innovation and Employment has released submissions made to the options paper it released on the Conduct of Financial Institutions Bill, which is expected to have its first reading shortly after Parliament resumes. 

Many submitters shared similar concerns about what the bill proposes. The bill introduces new conduct obligations for banks, insurers and non-bank deposit takers. It requires that banks, insurers and non-bank deposit takers meet obligations in relation to how they design their incentives for staff and advisers, and although a commission cap has not been included at this stage, MBIE has acknowledged it could mean a reduction in upfront commission.

AIA said in its submission that an element of target-based remuneration was important to maintain productivity and that could be done without prejudicing good customer outcomes.

“As an example, some degree of financial gateway is needed for soft commissions in the nature of business support (such as software licensing, professional development, and business mentoring and coaching). Without a gateway, we may need to either offer these to all advisers (which would be uneconomic) or scale-back the support we provide which encourages good customer outcomes. We are currently trialling a balanced scorecard approach for employed sales related staff using a conduct gateway and good conduct and customer outcome measures as part of the calculation.”