LIF phase two: Getting ready

LIF  came into effect on 1 January 2018 and will cap commission payments over three years:

Policies written on pre-LIF terms will continue to retain the commission terms which they were originally written.

Any policies written on LIF commission terms are not grandfathered – this means that increases or additions to these policies will be limited to maximum initial commission of 77% from 1 January 2019 and 66% from 1 January 2020.

Any new business or alterations not completed by 31 December 2018 will be subject to the maximum initial commission rate of 77%. 

In accordance with the legislative requirements, there will be no transition period on the changes to initial commission rates on 1 January 2019. Any business completed on or after this date will receive a maximum of 77% initial commission. This includes increases and additions to any existing policies written on LIF terms.

IMPORTANT – APPLICATIONS FUNDED BY ROLLOVER PROCEEDS

If your client is funding their application via a rollover from their super fund, rollover proceeds must be received and allocated by 31 December 2018 for the policy to be put into force.

As we do not have authority to obtain information or follow up outstanding rollovers with your clients’ fund, you should ensure that application requirements are fulfilled and rollovers requested as soon as possible as by law we will not be able to pay pre 1 January 2019 commission rates for policies issued after 31 December 2018.

Since the introduction of LIF reforms on 1 January 2018, initial commissions will be clawed back for policy cancelations or reductions in policy costs at the following rates:

These rules apply to:

• Cancelled policies
• Reduced premiums due to a cancellation of benefit(s) or option(s), or a reduction in the sum insured
• Reduced premiums due to some policy alterations like a waiting period increase or switch from level to stepped premiums