Risk reforms could hit the big banks

Set to take effect on 1 July 2016, the LIF will not only have a "significant" effect on advisers but also on the future of banks in insurance product manufacture, according to Rice Warner.

"The impact on the industry will be significant," a statement from Rice Warner said. "It is likely that more banks will follow the lead of NAB and exit the manufacture of life insurance to release capital.

"Expanded APLs means that [bank] advisers will sell more products of other manufacturers and less of their own brand. [Bank] customers will get better choice if more products are offered," the statement added.

Rice Warner said the firm expects the maximum commission rate of 60 per cent up front to become the "default commission" across the industry.

"Many life agents will moan about the reduction in up-front commissions but smart dealer groups will realise that the higher renewal commissions, being recurrent income for the practice, will add value to their businesses," Rice Warner said.

The firm added that amendments by the federal government to the Corporations Act to facilitate the "rationalisation of legacy life products" will lead to improved efficiency across the sector.

With all these changes, this should lead to more competition and reduced premium rates, Rice Warner said.

"[But] if ASIC still finds problems in three years, there could be further measures to improve consumer outcomes," the statement said.