The Financial Planning Association of Australia (FPA) has rejected proposals to ban commissions because it could leave consumers chronically underinsured and dependent on social security.
There had been a number of calls for the banning of all remaining conflicts of interest, including the life insurance commission, in light of the proposals from the quality review of advice on the framework life insurance (LIF).
This had been proposed by consumer groups such as Choice and Industry Super Australia.
FPA chief executive Sarah Abood said: “By banning commissions, we would effectively remove the ability of consumers to choose how they want to pay for their advice.
“Several research studies have shown that a high proportion of consumers would not buy insurance at all if they had to pay an upfront fee. So the result would be that far fewer Australians would have adequate insurance protection in place.
New retail life insurance business volumes are already expected to decline over the next few years as the number of advisors providing life insurance advice has declined and their compensation has also declined.
She said she welcomed the findings of the review which showed a significant improvement in the quality of life insurance advice provided over the past four years and said this was being ignored by those calling for a ban on commission.
“This improvement has not been recognized by consumer groups. These groups have taken a position that it is impossible to provide quality service to consumers in the event of a dispute, but the data shows that this is not the case. »
The FPA had previously said it wanted the two reviews of ASIC life insurance advisory records and a collection of life insurance data used for the review to be further evaluated to properly determine the outcome.