Intermediary division chief executive John Deane says bank-owned life offices in particular will struggle to continue to get parent firms, which are trying to shore up balance sheets, to hand over capital to pay commission.
Deane also claims that Aegon Scottish Equitable, whose parent company borrowed £2.4bn from the Dutch government earlier this year, will be facing increased pressure to use its capital sensibly.
He says rising costs of debt in the debt market will make it expensive for all life offices to raise capital for commission.
Deane says: “Equity analysts of life insurance companies will want to be comforted that life offices are using their capital sensibly. If they are using their capital to pay commission and those products have long payback periods, that is putting capital at risk and people will start to question this model. Those elements are much more likely to come together and bring a change in commission models than the FSA saying ‘this is what we want you to do from 2012’.”
A Clerical Medical spokesman says: “The only thing that will have an impact on our comm- ission model will be the RDR.”
Aegon Scottish Equitable life and pensions marketing director Andy Marchant says: “I do not think that capital will be the primary driver. There are existing drivers in the marketplace and there is the recognition by providers and advisers that the previous model was not entirely sustainable.”
Worldwide Financial Planning IFA Nick McBreen says: “Affordability will force life offices to reinvent themselves, alongside other drivers such as the RDR.”