Risk commission ban ‘dangerous’

Speaking to ifa, Mr Coyte said consumers “in general” will not pay a fee to receive advice on which insurance policy best suits their needs but would rather buy a policy as it is “human nature”.

Banning risk commissions could be “potentially dangerous” given that consumers will not pay a fee to receive risk advice, argues Shartru Wealth Management chief executive Rob Coyte.

Speaking to ifa, Mr Coyte said consumers “in general” will not pay a fee to receive advice on which insurance policy best suits their needs but would rather buy a policy as it is “human nature”.“[Commissions] being removed from insurance is potentially very dangerous and not because ‘it’s a change from the way it always has been’,” Mr Coyte said.

“Given the internet and the ease with which you can compare prices of providers and the prevalence of direct insurance products, we have [given] consumers enormous choice,” he said.

In addition, given that advisers must be licensed to discuss risk insurance products, Mr Coyte questioned whether consumers were adequately informed to make their own decisions about insurance.

He also said the debate surrounding adviser remuneration has been “hijacked”, stating it is not how an adviser is paid that should be examined but rather their skills in providing advice.

“Rather than focusing on full disclosure, transparency and the value delivered by good advice, the emphasis has been on how respective business models charge for their services,” Mr Coyte said.

“In regards to business models, I believe the more the better and the consumer is then free to choose which model they prefer,” he said.

Zurich head of marketing, life investment, Richard Dunkerley said the industry as a whole should be aiming for a community which is “well informed” with access to quality life insurance.

“We also support the notion of choice for consumers; we believe consumers should be free to choose their channel and how to pay for their advice,” Mr Dunkerley said.

“There is little doubt that commissions do open up access to advice to consumers who would otherwise be unlikely or unable to seek it.”

“Research we conducted three years ago found 57 per cent of consumers would leave the market altogether if they were forced to pay an out-of-pocket fee for life insurance advice (instead of via commission) – even if premiums were cheaper as a result,” Mr Dunkerley said.