Australians are increasingly bypassing advisers when it comes to purchasing life insurance, choosing to purchase direct according to research by NobleOak Life.
The Life Insurance Gap survey, commissioned by NobleOak Life and conducted by research group Prueprofile, found that 24 per cent of respondents that had life insurance purchased it directly, while only 3.4 percent of respondents purchased life insurance through an adviser.
“These survey results illustrate the growing trend to buy life insurance directly, outside of superannuation and without advice,” NobleOak chief executive Anthony Brown said.
“It’s appears that more and more clients want to take better control of their finances and save on external commissions.”
In addition, the research also found that only 2 per cent of respondents correctly understood the rate of commission and how it was built into life premiums.
Fifty-one percent believed that advisers received only 10-20 percent of annual premiums, with no up-front commissions.
“Financial advisers are doing it tougher these days, with higher costs associated with compliance and operating their businesses,” Mr Brown said.
“Most financial advisers still choose to receive higher upfront commissions of around 110 per cent of the first year life insurance premium, plus a smaller ongoing annual commission to offset their costs and better manage their cash flow.”
“Most consumers aren’t aware of this commission structure and are surprised with how much distribution costs are factored into an average life policy premium when told. While this commission disclosure is mandatory, it does not appear to be clear to most clients or the public in general.”
The company is looking to expand its services for financial advisers.
The FPA has developed a new SOA video toolkit to guide members.
“All advice should be regulated in a similar way”, a financial services firm has argued in its QAR submission.
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