Zurich Call to Retain Risk Commissions

Zurich has declared its support for the continuation of risk commissions beyond 2021.

Zurich’s Australian Life & Investments CEO, Tim Bailey… supports the retention of risk commissions and advocates broad industry collaboration in framing ASIC’s 2021 report

The insurer placed its stake in the ground following the release of new research it commissioned, which revealed the extent to which consumers are unwilling to pay out-of-pocket fees for life insurance advice.

The rationale underpinning Zurich’s support for the retention of risk commissions is based on two key elements:

  1. The implications for the consumer and for risk-focussed advisers if risk commissions are further restricted or banned
  2. The argument that current commission structures as dictated by the Life Insurance Framework reforms (while inherently conflicted by definition), will have little-to-no impact on the best interests of the client being served now or in future

Some of the key findings from the research, conducted for Zurich by Rice Warner, include:

  • Only 8 percent of those surveyed indicated they were willing to pay more than $1,000 as an out of pocket fee for life insurance advice
  • By contrast, 93 percent of advisers said they would need to charge in excess of $1,000 for that advice
  • None of the consumers surveyed said they were willing to pay $2,000 or more, which represented the amount that almost two thirds of advisers said they would need to charge

In another finding, which Zurich says illustrates the size of the challenge ahead if expert help with life insurance is to remain within reach of everyday Australians, almost 30 percent of consumers said they were not willing to pay any fee for life insurance advice.

These and other findings tend to reinforce the views that Zurich says it has advocated for some years, including its view that:

  • Expert financial advice across complex categories such as life insurance is of enormous value
  • Advisers should be paid fairly for the cost of providing advice at the time they provide it
  • Consumers should have a choice in how they are able to pay for that advice
  • Commissions play a vital role in allowing the everyday consumer to be able to access advice
Zurich …has long rejected the view that life insurance commissions are disliked and mistrusted by all consumers

In the introduction to its research findings, Zurich adds it has long rejected the view that life insurance commissions are disliked and mistrusted by all consumers, believing instead a significant proportion prefer – when given the choice – this method of remunerating their adviser.

The report also reflects on the impact on the community and advice sector that banning risk commissions has had in other countries including Finland, Denmark and, more recently, the Netherlands, where each has experienced a significant reduction in adviser numbers.

The insurer has used these research findings to call for industry collaboration when it comes to the framework that will inform ASIC’s 2021 review of life insurance advice and the impact that the Life Insurance Framework reforms has had on the quality of advice consumers receive.

…we often see the paradox that the time when cover is most needed is also the time when household finances are most challenged

In making the call for industry collaboration on ASIC’s 2021 review of life insurance advice, Zurich’s Australian CEO for Life & Investments, Tim Bailey, noted, “To the extent that demand for life insurance generally coincides with major life events, …we often see the paradox that the time when cover is most needed is also the time when household finances are most challenged.”

He continued, “Mandating an out-of-pocket fee to people in such circumstances, from 2021, is likely to put expert life insurance help out of reach at the worst possible time for them and would likely see people with inadequate or inappropriate cover, or worst still, no cover at all.”

Bailey also emphasised that a major priority for insurers and the advice profession, in partnership with ASIC and the Government, should be to help create a consistent and robust evidence base to be used by the many stakeholders who will shape the sector over the coming years.

Zurich has made its research white paper, The Risk Advice Disconnect, available to advisers via its national BDM network team.

  • Ken

    There has been a significant decline in new business applications to insurers across the board as advisers review their situation and how quickly a few significant cases lapsing under the 2 year “clawback” rule could put their business under teal pressure if not close it
    Zurich are no different to any business new business ( clients) are their life blood and when this dries up so do they
    For 3 years at least advisers have been trying to explain the onerous outcomes that are to be expected from this outrageous legislation based on a report that was severely flawed ( 413 )
    I assume that now that Zurich have made their move to support retention of commissions that the others will follow
    The non bank aligned first and so on
    The election will have a huge bearing on what is and is not retained should labor be elected
    Surely st some stage with all the past reports from The UK’s experience with this and several European countries common sense will prevail

    • Concerned

      Totally agree Ken. It was always going to be only a matter of time before the retail life insurers recognised what would happen after this shocking LIF legislation was enacted. And, yes, this entire fiasco goes back to ASIC’s 2014 flawed audit! Although Zurich are asking for a collaboration on the 2021 review, I believe that something needs to be done before that. The AFA, the newly established UFAA and now the insurance companies, all need to meet with the govt, “collectively” and make them understand what has happened and what will happen if LIF continues. There is no doubt that commissions need to be reinstated, this evil 2 year clawback must be removed, and do away with this FASEA nonsense that all existing advisers must have a degree. The longer this is left, the more advisers will exit and the greater the recovery period.

  • PS

    Zurich has put their hand up. How long do we wait to hear from the likes of AIA [CommInsure], BT, ClearView, MLC & TAL [Asteron]?

    The UK and more recently NZ decisions on commissions can’t be ignored by an astute observer – but then again, we are talking about politicians and bureaucrats here.

    Remember, the Labor government members of parliament from May 2019 to 2022 will not be around after 2030 when the full impact of underinsurance is felt in Australia – I.e. IF the Labor party doesn’t wake up to reality & understand that commissions are the only acceptable means by which ALL consumers can receive risk insurance advice – it is the small end of town that will be hurt not the big end of town – as Labor belatedly realised with the mortgage broking industry.