Home › Forums › Australian Financial Services Licensing (AFSL) Forum › Should Promoter revenue be included in PI? › Re: Should Promoter revenue be included in PI?
March 30, 2012 at 2:39 am #3106
Yes you should include it.
From an Insurers perspective, they are interested in revenue because they use it as a proxy for risk. The logic is that the more revenue you have the more business/clients/work you do, therefore the more chances of making a mistake and therefore more risk – more premium. You have revenue from 2 sources: advice revenue and promoter revenue, therefore you need to include all the revenue to ensure that all parts of your business are factored in. I expect the risk associated with ‘advice’ revenue is greater than the risk associated with ‘promoter’ revenue. Depending on your Insurer, they may or may not make this distinction. My advice:
- Include all the revenue;
- Specify the split of advice revenue and promoter revenue; and
- Explain why the risk associated with promoter revenue is low.
The Insurer may or may not take this into consideration when calculating your premium by applying a lower risk rate to the lower risk revenue.