Commission conflicts are now an FMA enforcement priority. Here is the maths behind them

Source: FMA, FMA sets out regulatory priorities for 2026/27 (MR No. 2026-31)

The FMA's second Financial Conduct Report names conflicts from remuneration structures as one of four cross-sector themes for 2026/27. On the regulator's own published ranges, writing you a new life policy pays roughly thirty times what keeping your old one pays.

By · Regulation · 2026-06-30

On the FMA's own published figures, a New Zealand life insurance policy pays the adviser who writes it between 170% and 210% of the first year's premium, and between 5% and 12% a year after that. On a $1,500 annual premium under the most common structure, that is the difference between about $3,000 for a new policy and about $90 a year for keeping the existing one. On 30 June 2026 the FMA named conflicts from remuneration structures one of four cross-sector priorities for 2026/27 (FMA, MR No. 2026-31, retrieved 20 August 2026).

We read the public documents. We were not briefed and we spoke to nobody.

What the FMA published

The FMA released its second annual Financial Conduct Report, covering progress over the past year and its priorities for 2026/27. Four cross-sector themes are named: managing conflicts from remuneration structures, product design for new and redesigned products, complaints, and fraud detection and prevention (FMA, Financial Conduct Report 2026/27, retrieved 20 August 2026).

The remuneration theme is tagged to two sectors: consumer credit and financial advice. In the financial advice section the FMA says it will focus on whether providers have effective controls to manage conflicts arising from commissions, "and to detect and deter misconduct that may be incentivised by commission-based relationships", covering both upfront and ongoing commissions. It says it is "aware of high upfront commissions for financial advice across life, health and disability insurance products, and KiwiSaver, which increase the risk of consumer harm".

Four gaps from the FMA's 2025/26 monitoring are listed as the basis for the focus. Disclosure of the actual commission payable to both the provider and the individual adviser was inconsistent, as was the treatment of clawbacks where advice does not proceed or products are replaced early. Gaps in recognising vulnerability indicators produced poor advice outcomes, including "the sale of unsuitable products and inappropriate replacement business driven by commission incentives". And the FMA's access to advice review found certain commission structures can prioritise new business over servicing existing clients.

Consumer credit transferred to the FMA on 1 July 2026, bringing it under a single conduct regulator.

How life and health insurance commission actually works

The FMA has published the mechanics twice, in 2016 and 2019. It has not published updated rates since, so these are the most recent figures with a named source.

An adviser can receive four types of payment on a life or health policy (FMA, Replacing life insurance, who benefits?, page 10, June 2016, retrieved 20 August 2026). Upfront commission is paid on the initial sale. Trail commission is paid every year the policy stays in force. Bonus commission is paid for meeting criteria such as volume or persistency. Soft commission is a non-monetary benefit, covered in a separate story.

Those combine into three structures. Under an upfront structure the first-year commission can be as high as 200% of the annual premium including bonus commission, with a trail of 5% to 7% a year afterwards. Under a hybrid structure the upfront is lower, up to about 150%, with a trail of 10% to 12%. Under a level structure the upfront is roughly equal to the trail. The FMA states that in New Zealand the upfront structure is the most common (FMA, 2016, page 11, retrieved 20 August 2026). Three years later the FMA and the Reserve Bank put a tighter range on it: large upfront commissions at the time of sale "can commonly range from approximately 170% to 210% of first-year annual premiums" (FMA and RBNZ, Life Insurer Conduct and Culture, page 18, January 2019, retrieved 20 August 2026).

The clawback is the other half of the machinery. If you cancel within a specified clawback period, usually two years, the adviser must repay a portion of the upfront commission to the insurer. The FMA notes that some advisers charge that clawback on to the customer.

Thirty years of trail equals one new sale

The FMA publishes the percentages. It does not publish what they mean side by side. Apply both to the same $1,500 annual premium.

Structure Upfront, % of first-year premium Trail, % a year Upfront on $1,500 Trail a year Years of trail to match one upfront
Upfront (most common) up to 200% 5% to 7% $3,000 $75 to $105 29 to 40
Hybrid up to 150% 10% to 12% $2,250 $150 to $180 13 to 15
Level roughly equal to trail roughly equal to upfront n/a n/a about 1

Percentage ranges from the FMA (page 11, retrieved 20 August 2026). The dollar columns and the final column are our arithmetic on a $1,500 annual premium, chosen because it is the premium the FMA uses in its own worked example on page 18 of the same report.

Under the structure the FMA says is most common in New Zealand, a new policy pays the equivalent of 29 to 40 years of trail on an existing one. Put the other way, the upfront commission on a single new $1,500 policy is worth the same as retaining that client for the better part of a working life.

Now add the clawback. It usually runs two years. At month 25 the adviser owes nothing back and can write the same client a new policy at full upfront again. The FMA's own data shows what happens next: policies with a high upfront commission and a lower trail were 1.6 times more likely to be replaced once the clawback period ended, and product quality scores were "only a minor factor" in whether a policy was replaced (FMA, 2016, page 13, retrieved 20 August 2026). The 1.6 is the FMA's. The reason it is 1.6 rather than 1.0 is the ratio in the table above, and that connection is ours.

Why the 2025 rules did not fix this

From 31 March 2025, incentives calculated by direct reference to a sales target or threshold are prohibited. The regulations give the example of a $1,000 bonus for selling at least 100 life policies in three months, and prohibit it. But they also give a worked example of what is not prohibited: a commission calculated as a fixed percentage of the first year's premium, on a per-policy basis, with no target (Financial Markets Conduct Regulations 2014, regulation 237E, retrieved 20 August 2026).

That is the structure described above. The prohibition removed volume bonuses and tiered targets. It left the 170% to 210% upfront untouched, because a linear percentage of premium is expressly permitted. Which is why the FMA has had to name it a supervisory priority rather than enforce a ban: the conduct is legal, and the concern is whether the conflict it creates is managed.

What you can ask your adviser, and what they must tell you

Naming it a priority creates no new consumer right. The existing one is more specific than most people realise.

When the nature and scope of the advice you are seeking becomes known, a financial advice provider must tell you, for each commission or other incentive: when or in what circumstances it will be given, who would give it and to whom, its amount or value or how that would be determined, and the steps taken to manage the conflict. When the advice is actually given, the same information must be provided to the extent it was not already (Financial Markets Conduct Regulations 2014, Schedule 21A clauses 5(2)(d) and 6(2)(d), retrieved 20 August 2026).

Three questions follow from that wording and from the FMA's stated gaps.

Ask what the commission is as a percentage of the first year's premium, and what it is in each year after. The FMA found disclosure of the actual amount payable was inconsistent, so a general statement that commissions are received is not what the regulations require.

Ask how long the clawback period runs and whether you would be charged for it if you cancel. The FMA flagged clawback treatment as an area of inconsistent disclosure.

If you are being advised to replace existing cover, ask what commission is payable on the replacement and what happens to the commission on the policy being cancelled. Replacement is where the FMA's own numbers show the conflict biting hardest.

The honest limits

The FMA does not publish current commission rates. The 200% and 5% to 7% ranges are from 2016 and the 170% to 210% range is from 2019. Both predate the incentives regulations that took effect on 31 March 2025. Rates today may be lower. We could not find a published source that says so, and we are not going to assert one.

The $1,500 premium is illustrative. It is the figure the FMA uses in its own scenario, not an average, and the FSC does not publish an average premium per cover.

The years-of-trail column assumes premiums stay flat, which they do not on a stepped policy, and ignores that trail accrues every year while an upfront is paid once. It is a ratio of first-year cashflows, and that is all it claims to be.

The Financial Conduct Report sets priorities. It does not allege that any adviser or provider has breached anything, and neither do we.

QuoteHub is operated by Craig Smith Business Services Limited, trading as Smiths Insurance and KiwiSaver, a licensed Financial Advice Provider (FSP712931). It is remunerated by commission from insurers on the same basis described above. Our arrangements are set out on our disclosure page.

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