Just under 80% of consumers believe commissions is a fair way for financial advisers to be remunerated when providing life insurance advice.
This is one of the headline findings from a research study released by Zurich, which asked 300 consumers to consider the question of how advisers are paid for the life insurance advice and services they provide.
When presented with a choice between paying adviser commissions via their insurance premiums or paying an additional, upfront fee for the advice provided, 79% of the 300 survey respondents (all aged between 20 and 50) said commissions were fair, while the remaining 21% disagreed.
… the overall risk market would reduce by 24% if risk commissions were banned
Another key finding that emerged from the survey, which Zurich commissioned via an external independent market research firm, revealed 57% of consumers were less likely to seek life insurance advice if upfront fees for that advice were made compulsory. While 33% said they would be more likely to seek life insurance advice if upfront fees were made compulsory, Zurich says this finding demonstrates the overall risk market would reduce by 24% if risk commissions were banned.
These findings were released to advisers in Zurich’s February 2011 Risk Pulse publication, in which Zurich’s General Manager – Life Australia, Colin Morgan, said his company’s position on this issue “… is not borne out of a pure focus on advisers, but also on the wishes of consumers.
… consumers benefit significantly from the commission system as it improves their ability to pay for quality advice
Mr Morgan adds that Zurich believes consumers benefit significantly from the commission system as it improves their ability to pay for quality advice at a stage in life where their need is highest but their ability to afford that advice is quite low.
Another finding, which tends to reinforce other studies, is that the maximum fee a consumer would be willing to pay for risk advice would be $605. Mr Morgan points out this is well below the real cost of advisers providing that advice.
In calling for the Government to find ways to bring consumers and risk advisers together rather than potentially pushing then apart, Mr Morgan said the findings of this research reinforced some of Zurich’s beliefs:
- Consumers are supportive of the concept of commissions in risk provided there is transparency about them
- Affordability issues will drive more consumers out of the market than will be attracted in if commissions were removed as a remuneration option
Advisers can click here to access the full Risk Pulse article.
