At the same time as the Australian Securities and Investments Commission (ASIC) moves further into its review of the Life Insurance Framework (LIF) key identities in the life advice sector have backed a report defending risk commissions and pointing out the current state of the life insurance market.
The report has been written by life insurance specialist, Brett Wright and argues for the retention of life/risk commissions on the basis that the experience of fee-for-service (FFS) is that advisers will need to charge consumers between $600 and $1,500 each year to do reviews and make any adjustments.
“Consumers will also need to cover any increase in premiums from the insurer too (not uncommon in today’s market for a stepped premium to increase 10% to 25%,” Wright claims.
The report has been supported by Neos Life chief executive, John de Zwart, PPS mutual chief executive, Michael Pillemer, Bombora Advice managing director, Wayne Handley, Lonsdale, Millenium3 and IOOF Alliances chief executive, Helen Blackford, Synchron director, Don Trapnell, Austbroker adviser and director, Ben Donald and life insurance advice advocate, Nettie Handley.
Within the report Wright claims that since commissions have reduced under the LIF reforms, “premiums have been increasing, not decreasing”.
“FFS in insurance increase costs for everyone and wipe out affordable access to pooled risk and advice for those who need it most,” his report states.
“FFS makes insurance advice unaffordable for 90% to 95% of consumers and forces them to rely on inferior direct or group insurance products that generally cover less, cost more and deliver poorer claims outcomes; or even worse, consumers will not bother with insurance at all.”
“There is room for FFS and consumers who want and/or can afford FFS can access this option already. But FFS should not be the only option and it is essential consumers maintain their right to choose between the commission and FFS models and decide which is best for them.”
The report can be accessed here.