Research confirms validity of risk commissions

The Association of Financial Advisers (AFA) has used new research results to urge the Federal Government not to abolish commission-based arrangements around advice relating to insurance products.

The research, released today, found that many Australians would not seek life insurance advice if they were forced to pay for it via an upfront fee rather than by commissions.

The research also suggested the Government’s proposed opt-in arrangements would act as an impediment.

The research, conducted by CoreData and sponsored by major insurer, AIA Australia, was based on a survey of corporate superannuation and life insurance clients and revealed that a commission paid by the insurance provider was the most common and preferred method of payment with respect to life insurance.

It found that strong evidence existed to support the contention that many people receiving life insurance advice in today’s environment would exit the market if forced to pay a fee for service.

Commenting on the results, AFA chief executive Richard Klipin (pictured) said it had revealed that people who used a financial adviser for their life insurance needs were more likely to have appropriate cover and be confident they understood what type of cover they had.

“Disturbingly, however, many would not pay for it if commissions are abolished,” he said.

“Ultimately, what these findings tell us is that the proposed Future of Financial Advice (FOFA) reforms around the possible banning of commissions on risk products and opt-in will, if implemented, have a devastating effect on ordinary Australians.”

“Fewer would get advice and even fewer would have life insurance,” Klipin said.