Increase commission for life insurance to reduce underinsurance
Commission should continue to be offered on insurance advice, according to The Advisers Association (TAA), and current commission rates are too low.
The association’s submission to the Quality of Advice Review stated insurance was more similar to mortgages than to investment products and that commission on insurance would help consumers access affordable advice.
The current mandated commission rates helped to manage and minimise conflicts, as the adviser received the same percentage and remuneration regardless of which product provider they chose, but that current rates were too low.
Neil Macdonald, chief executive, and chair Bill Beimers said: “We believe there are significant benefits to consumers and the broader Australian economy to continue to allow commission on insurance.
“Current upfront commission is too low to cover the costs of providing insurance advice, which is reflected in the number of members who have ceased providing insurance advice.
“Access to insurance advice for consumers has deteriorated with the exit of many risk specialists. We will leave it to others to argue what the upfront commission should be but our starting point is it should not be less than the current 60% and preferably be 80% or above.”
It felt commission should continue to be banned on investment and superannuation products as most firms had already changed their business models.
Other measures which would help improve the uptake of life insurance and reduce the amount of consumers who were underinsured included clarifying the ability to safely scope advice and introducing Letters of Advice for life insurance.
TAA also contributed to the joint submission from 12 organisations.
AUTHOR
Laura Dew
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