ClearView has argued its case for life insurance commissions, saying additional changes to adviser remuneration will not lift advice quality and will only drive up costs.
A new paper from ClearView draws on findings from its ‘Adviser Experience Survey’ to illustrate the likely unintended consequences of further changes to life insurance commissions, and seeks to disprove that commissions lead to poor client outcomes. It also identifies the real cause of poor advice and emphasises the benefits of variable remuneration structures.
Based on the research, the vast majority of advice practices depend on upfront commissions and only 2 per cent charge a flat fee for life insurance advice.
Further, over 80 per cent of advisers do not believe consumers will pay a fee for insurance advice indicating that further reductions in commission caps will force them to focus only on affluent clients who are willing and able to pay a fee.
ClearView chief actuary and risk officer Greg Martin said values and culture play a major role in shaping behaviour within professions and organisations.
“It is unfortunate that much of the public discourse around the behaviour of financial advisers is disproportionately focused on remuneration and not the role of industry culture and norms,” he said.
“If a culture is unsound then a remuneration structure won’t fix it but if a culture is sound, the remuneration structure shouldn’t matter much.
“It is critical that any reform agenda addresses the real problems and enacts real change to avoid unnecessarily increasing business costs, which means higher costs to consumers.”
Mr Martin added that sensible public policy should encourage and facilitate the purchase of appropriate life insurance coverage by more Australian households.
“It should also promote sound, sustainable business management. Today’s commission debate forgets that variable remuneration structures link ‘costs’ to ‘income’ or ‘success’ and allow businesses to better manage their revenue and profitability,” Mr Martin said.
“The current upfront commission structure is widely-accepted, economically rational and reflects what consumers actually want.”
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