John Trowbridge has suggested an overhaul of commissions for Australia’s adviser that would limit advisers to $1200 in upfront commissions for life insurance advice, per client, no more than once every five years.

Advisers dealing with clients with premiums below $2000 per year would be limited to commission of no more than 60% of the first year’s premiums.

Organisations such as AMP have already moved – slashing upfront commissions to 80% with an ongoing commission of 20% for Australian advisers.

In New Zealand, 200% upfront commissions are not uncommon.

The FMA has launched an investigation into life insurance churn and has written to insurers asking for data on new policies written in the past five years.

Fidelity Life chief executive Milton Jennings said something needed to be done about the New Zealand situation. “There’s been some pretty bad behaviour by a small number of advisers. They ruin it for the good ones.”

He said some legislation would have to be brought in to address it.

But he said it would be important to support the adviser community, too. “If we go to the level Trowbridge is talking about, we could lose a third to a half of all advisers, we need to make sure that doesn’t happen.”

Naomi Ballantyne, of Partners Life, said any investigation into churn should not focus solely on commission. “A number of life companies have actively encouraged replacement business through ‘transfer underwriting terms’ and/or increased commissions for transferred business on several occasions in the past so a singular focus on the role an adviser has played in ‘conflicted’ replacement advice is also not sensible.”