Australian Financial Services Licensing (AFSL) Forum

#3106 Reply

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.

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