Further changes to life insurance commission caps could see up to 87% of financial advisers stop providing standalone risk insurance advice, according to research by ClearView.
According to ClearView’s Quality of Advice Review submission, which was based on a survey of advisers conducted by ClearView between 20 April, 2022 and 23 May, 2022, the Life Insurance Framework (LIF) had no material impact on advice quality since its introduction in 2018 and had only quashed the ability of advisers to service clients with relatively simple needs.
ClearView said its analysis showed further changes to life insurance commission caps would decimate the life insurance industry and exacerbate the nation’s underinsurance problem.
The survey found around 67% of financial advisers would stop providing standalone risk advice and a further 20% were unsure if they would continue, if life insurance commissions were subject to further changes.
Meanwhile only 5% of advisers believed LIF had had a material impact on advice quality.
“Instead, the ongoing separation of product and advice - leading to the breakdown of vertical integration and the institutional exodus from personal advice - has had the biggest impact on lifting standards, followed by higher education and training requirements,” ClearView said.
The ClearView Quality of Advice survey also found that the advice industry was heavily dependent on life insurance commission revenue, with 94% of advisers accepting life insurance commissions.
Furthermore, 70% of advisers did not plan to change the way they charge for life insurance advice and a further 17% were unsure.