An overwhelming number of advisers have supported the role commission payments play in addressing Australia's underinsurance problem.
In a survey conducted by Risk Adviser sister title ifa, readers were asked whether commissions on risk products should be banned.
Of the 776 who participated in the survey, 73 per cent said that they should not be banned, claiming they assist with the underinsurance problem the industry is working hard to fix.
This was compared to 27 per cent of respondents who believed commissions in risk advice were a form of conflicted remuneration.
In light of ASIC’s recent Review of retail life insurance advice report, which found a correlation between high upfront commissions and failed advice, many have debated whether or not commissions should be replaced with a fee-for-service model.
Although many have also argued that introducing a fee-for-service model will leave the majority of Australians unable to afford advice on insurance.
Speaking to Risk Adviser, Shartru Wealth Management chief executive Rob Coyte pointed out that while a fee-for-service model can work inside financial advice it will leave many unable to afford it in risk advice.
“If you had money to invest you have money to pay advice fees,” he said. “Insurance however, is a different kettle of fish as some clients who need advice cannot afford advice.
“[Also all] consumers and advisers currently have the opportunity to rebate commission and operate under a fee-for-service arrangement.
“I believe that as the 'market' provides the option to the adviser/consumer than regulation is not required as the negative effects can be greater than the benefits,” he said.
Mr Coyte also pointed out that given the current law effectively protects consumers against “unscrupulous conduct” it is imperative that the law now be enforced instead of looking for alternative answers in remuneration to addressing poor quality advice.
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