Insurers which rely too heavily on IFA distribution could see their ratings affected following implementation of the retail distribution review, warns Moody’s.
The rating agency says it expects the RDR to have negative credit implications on those companies relying solely on IFA distribution as smaller players will no longer be able to compete by offering higher commission. As a result, it expects insurers to diversify away from IFA channels.
Vice-president senior credit officer Antonello Aquino says that over the long term, the RDR may bring improved quality of advice and a reduction in misselling but adds: “Clearly, there is a risk of a serious disruption to this important distribution channel, which will mean that insurers relying exclusively on IFAs will suffer.
“As a result of the RDR, we expect that insurers will continue diversifying away from IFAs by developing other distribution channels and increa-sing their brand awareness with the public.”
Master Adviser IFA Roy McLoughlin says: “It is not insurance companies moving away from IFAs, it is the other way round. A lot of IFAs are setting up on platforms and bypassing life companies.”