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So your modelling allows for no annual review fee for the adviser on the assumption that there wouldn't be a review completed??.......what about if the client has a claim in the second year and they require significant input and assistance from the adviser (or are you also assuming that clients don't make insurance claims within the first 3 years of the policy commencement ?)...if they do have a claim, the renewal commission can help offset the advice and input from the adviser when assisting in the claim process.
Don't you charge for an annual review?
Or don't you complete annual reviews ?
Or do you complete your annual reviews for free?
Or don't any of your clients have to claim on their policy?
Or don't you have any insurance clients at all ?
What if the client wants to increase their insurance cover in year 2 ,the premium increase is an additional $2000.
Their circumstances have changed and so you have to complete a new Fact Find, SOA, application form, medical assessment and 2 client meetings plus travel to their home 50km away.......another 10 hours work.
The additional $2000 premium cost would at least allow the adviser to be remunerated for their work at $1600.00.
Strip the commission out and the additional premium reduces to $1400 and you issue them with an invoice for your advice for
$1600.00.....total cost to an existing client to increase their cover in the second year is now $3000 as opposed to the $2000 cost if paid via commission. (50% increase).
Your argument is becoming heavily tainted with your ideology rather than being realistic.
You have failed again in this example to address the problem of the maximum total initial cost the client would be prepared to pay and pushed forward with the assumption that clients would agree to pay 50% more than necessary to get the correct level and type of insurance cover in place in the hopes that they may receive a minor long term cost benefit.
What if the client cannot afford your 50% increased up front costs and decides to not proceed with your recommendations and then has to pay your advice fee, then contracts Cancer and dies 6 months later ?
Do you reckon that if they had put the insurance cover in place at an affordable cost level rather than deciding to avoid that decision because of the increased cost that your argument would carry any relevance at all when their family receives a lump sum payment to ensure their financial independence and dignity ?
In addition to that, they may have paid you your advice fee, decided against implementing the insurance because of the cost and then received no funds in the event of the death.
I am not arguing that fee for service risk insurance or a combination should not be available and may suit some clients.
I am arguing that by removing choice of a commission model, you are significantly disadvantaging the consumer who has a right to choose which option suits them best.
Irrespective of any case studies or calculations, you will continue to adamantly push your singular ideology.
The removal of remuneration via the commission model for risk insurance is a flawed argument, the level of insurance will plummet and many Australians will be left without adequate financial protection.
Providing choice and not removing it, is in the consumers best interest.