Warning of pitfalls in Trowbridge report

The Life Insurance and Advice Working Group (LIAWG) interim report needs to be closely examined by advisers because some of its recommendations, such as a five year responsibility period represent a return to a regime abandoned in the 1980s.

That is the assessment of Synchron director, Don Trapnell who has lamented that the report has failed to adequately take account of the hard work and effort undertaken by risk advisers.

He said the report had appeared recommend bringing back a three to five year responsibility period for advisers, "cloaked in the guise of a loan from insurers to advisers".

"In reality this is a three to five year commission responsibility period that was removed from our industry due to competitive pressures in the 1980s," he saids "In my opinion, for insurance companies to now attempt to reintroduce a long responsibility period, without the market levelling effect of competition, is in its nature price-fixing."

Trapnell said he believed it was completely inappropriate to attempt to move responsibility away from product manufacturers and on to advisers in such a way.

He urged advisers and other interested parties to respond to the findings and recommendations of the interim report, providing clear evidence of how they operate their businesses and how they will be impacted by its recommendations.

Trapnell also mounted a defence of trailing commissions, arguing they were a completely acceptable form of revenue for life advisers.

"The trailing commissions a life adviser receives are actually renewal commissions, paid to keep policies on the books," he said. "The renewal commissions advisers receive on a whole number of policies compensate them for the time and effort they put into helping an individual client when they genuinely need it most — at claims time. The renewal commission an adviser might receive on a single policy would go nowhere near covering this cost."