Opt-in and fee-for-service will worsen underinsurance

A move towards opt-in and a shift to fee-for-service remuneration may force many consumers to walk away from advice about life insurance, according to AIA head of adviser services Pina Sciarrone (pictured).

Referring to recent CoreData research commissioned by the Association of Financial Advisers called Risking Everything, Sciarrone said the results clearly showed consumers had an aversion to paying up-front fees.

Two in five respondents in the survey said they would not be prepared to pay fees on life insurance advice, and almost half said the reason they had not sought advice was an aversion to paying fees, Sciarrone said.

“It’s telling us that consumers don’t have a problem with commission at all – they want choice,” Sciarrone said.

“A ban on commissions may force consumers to pay up front fees, and it may see consumers exit the market – that will exacerbate underinsurance,” she said.

Members of corporate super funds valued the range of advice services they had access to, according to the survey, particular the ongoing interaction with their adviser, and the service was also valuable to employers, Sciarrone said.

If opt-in is introduced these people will not opt-in to pay advice, and many will walk away from their corporate super fund. Many of these people will not seek advice after leaving that corporate fund, she said.