Life commissions ‘good for consumers’, says licensee
A licensee head has called for life insurance commissions to be retained, arguing that they are “good for consumers”.
The Hayne royal commission final report recommended to ultimately reduce the cap on life insurance commissions to zero unless there was “a clear justification for retaining those commissions”.
But in a contributed blog, Synchron director Don Trapnell said he had a clear justification of retaining life insurance commissions.
“Life insurance commissions are good for consumers. Yes, good,” he said.
“What happens when you take away life insurance commissions is that consumers do not seek out and pay for life insurance advice.”
Mr Trapnell cited the experience in the Dutch market where commissions were banned.
He said that in the Netherlands, advice is now only sought and paid for by the wealthy, not the everyday consumer.
Because it is restricted to those who probably need it the least, Mr Trapnell argued that those who probably need life insurance advice the most have to resort to getting advice over the back fence and purchase products online or over the phone.
“We all know from the royal commission how well that goes. Not well,” he said.
“Ban commissions in Australia and you can expect similar outcomes – many everyday Australians just won’t be able to afford to pay, or would be unwilling to pay for advice upfront from their own hip pockets.
“They will therefore have to be content with the cover they have in their super funds, if any, take life insurance tips from their mates and buy direct or go without. How is this a good outcome?”
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