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Less commission for brokers after life insurance tax kicks in… really?

Couldn’t help commenting on this Herald article that talks about the upcoming tax changes for life insurance.

In the article, Sovereign Insurance announced that three parties will shoulder the increased tax burden… the consumer will take one third (15% increase in premiums), the broker will take one third (commissions reduced from 230% to 200%), and Sovereign itself will soak up anything that’s over.

Well, I have to say, I couldn’t get the math to work. Watch this…

Selling a policy before the tax change…

  • Assume a policy with premiums = $1000.00 pa
  • Commission paid @ 230% = $2,300.00

Same policy after tax change…

  • Premiums increased by 15% to $1150.00 pa
  • Commission paid @ 200% = $2,300.00

Somebody… help!

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