Scrapping up-front commission on insurance products would kill the protection market because consumers will not pay fees for advice, says Lifesearch head of protection strategy Kevin Carr.
He warns that removing indemnity commission in the protection market would be counter-productive and lead to consumer detriment because people will be less likely to take advice if they have to pay a fee.
Carr believes that the protection industry needs to avoid being lumped together with other financial services sectors, such as pensions, where commission is heavily under fire.
Torquil Clark Life Insurance director Jason King says getting rid of up-front remuneration would worsen the protection gap because it would cut out advice out, which is a big part of the supply chain to consumers.
Carr says: “Consumers do not see the value in advice so why would they pay a fee for it? The protection market is fundamentally different from the investment and pension sides because there is no fund for the commission to eat into on protection products and therefore no detriment to the consumer.”
King says: “Getting rid of commission would work against the interests of consumers. Fewer people would be buying with advice, which would lead to more incorrect decisions so they would buy the wrong product or not cover themselves adequately.”