Australians paying billions each year in life insurance commissions
Media release
Households losing thousands over time in built-in commissions
Sydney, 22 April 2026: Australians are paying an estimated $1.6 billion to $2.25 billion a year in life insurance commissions, with ongoing payments to advisers and brokers often continuing long after their policy was arranged, according to analysis by digital wealth platform InvestSMART.
Under current rules, advisers and brokers can receive up to 60 per cent of the first year's premium upfront, and up to 20 per cent of the premium every year ongoing. These commissions apply to policies covering death, total and permanent disability (TPD), trauma and income protection.
Of the $16-18 billion paid in life insurance premiums each year, about $8-9 billion comes from policies held outside superannuation, the segment where majority ongoing commissions are built into premiums, even though since July 2025 advisers must obtain written informed consent before receiving commissions for personal advice.
What it means for policyholders
On a policy costing $2,000 a year, commissions could total around $4,800 over 10 years.
Total commissions paid to financial advisers
|
Annual premium |
Upfront 60% commission (year 1) |
Ongoing 20% commission per year (years 2-10) |
Total commission over 10 years |
|
$1,000 |
$600 |
$200 |
$2,400 |
|
$2,000 |
$1,200 |
$400 |
$4,800 |
|
$3,000 |
$1,800 |
$600 |
$7,200 |
Source: InvestSMART
InvestSMART CEO Ron Hodge said many Australians may not realise these payments continue automatically, prompting questions about whether Australians are getting value for money.
"Most Australians don't realise that a good chunk of their insurance premium isn't paying for cover at all, it's paying an ongoing commission," Mr Hodge said.
"Up to 20 per cent of the premium each year can go to a financial adviser, insurance broker or other financial intermediaries. Those payments continue even if no advice is being delivered."
"For someone paying $3,000 to $4,000 a year in premiums, that can mean $600 to $800 annually in commissions. Over a decade, that's thousands of dollars."
Mr Hodge said many policies were established years ago and may not have been reviewed recently.
"With premiums rising sharply, particularly for income protection, households are feeling the strain. When families are watching every dollar, it makes sense to review whether you're still paying for advice you're no longer receiving."
He said ongoing commissions can be appropriate where clients are receiving ongoing advice and support.
"The issue is transparency. Many Australians don't realise these payments continue unless they actively change their arrangements."
Why do commissions exist?
Life insurance policies held outside super have traditionally been sold through advisers and brokers who are paid by insurers via commissions built into the premium.
While reforms capped commission levels, they were not banned entirely in order to preserve consumer access to advice and avoid large upfront fees.
Mr Hodge said the structure means commissions can continue even if the adviser relationship has ended.
"What began as consumer protection has resulted in a system where commissions can continue long after the advice relationship has ended," he said.
A way to reduce costs without cancelling cover
InvestSMART offers an insurance Cashback service that helps eligible policyholders reclaim part of the commission embedded in their premiums where no ongoing advice is being provided.
Policyholders provide details of their existing cover and InvestSMART assesses whether a rebate is available. In many cases, clients can retain their existing policy while receiving annual cashback.
Contact
Lauren Franze
📧 l.franze@investsmart.com.au
📞 0451 803 082
Frequently Asked Questions about this Article…
Life insurance commissions are payments built into premiums that go to financial advisers, brokers or intermediaries who sold the policy. Under current rules advisers can receive up to 60% of the first year’s premium upfront and up to 20% of the premium each year ongoing. Those commission amounts mean a significant portion of your premium can be paying for advice rather than the cost of cover.
InvestSMART’s analysis estimates Australians pay about $1.6 billion to $2.25 billion a year in life insurance commissions. Of the roughly $16–18 billion paid in life insurance premiums annually, about $8–9 billion comes from policies held outside superannuation — the segment where most ongoing commissions are embedded.
It depends on your annual premium. Using InvestSMART’s examples, total commissions over 10 years would be about $2,400 on a $1,000-a-year policy, $4,800 on a $2,000-a-year policy, and $7,200 on a $3,000-a-year policy (assuming 60% upfront in year one and 20% ongoing each year thereafter).
The current commission structure means payments are built into premiums and can continue automatically. InvestSMART warns that commissions can keep being paid even if the advice relationship has ended, and many policyholders may not realise those payments continue unless they actively change arrangements.
Reforms capped commission levels rather than banning them, to preserve consumer access to advice. Since July 2025, advisers must obtain written informed consent before receiving commissions for personal advice, but ongoing commission payments can still be embedded in premiums under the current rules.
Yes — InvestSMART acknowledges ongoing commissions can be appropriate where clients receive genuine ongoing advice and support. The core concern raised is transparency, because many policyholders don’t realise ongoing payments are being deducted from their premiums.
InvestSMART offers an Insurance Cashback service that helps eligible policyholders reclaim part of the commission embedded in their premiums where no ongoing advice is being provided. Policyholders provide details of their existing cover and InvestSMART assesses whether a rebate is available — in many cases clients can keep their existing policy and receive annual cashback.
The media contact listed by InvestSMART is Lauren Franze: l.franze@investsmart.com.au and phone 0451 803 082. InvestSMART’s CEO Ron Hodge is also quoted in the analysis about the impact of commissions on policyholders.
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