Upfront commissions for life insurance advice are justified in certain conditions because of the effort an adviser needs to put in during the initial advice process, according to actuarial consultancy, Rice Warner.
Rice Warner's head of life insurance, Thierry Bareau pointed to the recent Australian Securities and Investments Commission (ASIC) review of advice around life insurance and said the company believed there was "evidence of misalignment of remuneration and some abuses of the high upfront commission system".
He said this had led to lapse rates in Australia which were far too high against global standards.
"A clear question is whether people are paying too much for advice around insurance? Rice Warner believes there is evidence of a misalignment of remuneration and some abuses of the high upfront commission system. However, upfront commissions are justified in certain conditions because of the effort the adviser needs to put in during the initial advice process," Bareau commented on the company's website.
He said it was in these circumstances that product manufacturers and licensees had to do more to resolve the issues through improved product design and greater attention to the standards upheld by the advisers using their products.
