Major life insurer ClearView has committed to defending commissions-based remuneration for life/risk advisers, including campaigning in support of their retention.
ClearView chief executive, Simon Swanson issued a formal message stating that while the company broadly supports the recommendations of the Royal Commission there are some elements of the industry’s structure which are worth protecting – “namely the ability of product manufacturers like ClearView to fund the provision of life insurance advice through commissions”.
“In a perfect world, consumers would autonomously recognise the value of life insurance advice and willingly pay a fee for it but that’s not how it works,” Swanson’s statement said. “The truth is life insurance is a complex financial product. It offers many benefits, but these benefits may not be realised for 20-30 years.”
“While insurance provides comfort and peace of mind, and allows consumers to transfer risk to an insurance company, they’re effectively buying a promise. Financial advisers play a critical role because they help consumers understand and assess the value.”
Swanson wrote that, unlike advice on investing and superannuation (or even lending), where an advice fee could be deducted from a large capital sum, such as an investment portfolio, life insurance advice would need to be funded from a household’s (surplus) cashflow, if commissions were removed or further reduced.
“That’s a big ask at the best of times, let alone in today’s economic environment of ultralow interest rates, stagnant wage growth and rising living costs,” he wrote. “Requiring consumers to pay a fee for life insurance advice would result in significantly fewer people seeking advice and obtaining adequate cover, and it would cripple many advice businesses.”
Swanson said it would also further exacerbate Australia’s underinsurance problem, which already stood at over $1.8 trillion and ultimately place unsustainable pressure on individuals, families and the social security system.
Swanson committed ClearView to advocating for stable life insurance commission rates, the tax deductibility of financial advice fees and life insurance choice of provider.