Advisers are calling for flat life insurance commissions to enable them to deal with administering these payments in a fee-for-service model.

Lanyon Partners CEO Bruce Birchall says flat commissions would replace up-front payments and trails.

“We need to tell the life companies we now need flat commissions to work within a fee-for-service model” he told insuranceNEWS.com.au.

“Flat commissions will bring pricing down and in that sense it is a win for the client.”

Mr Birchall says it will be complex running both fee-for-service and commission payments in a practice such as Lanyon Partners, as it provides accounting, investment, life and general insurance advice.

“We have a lot of people involved advising clients in different areas, so it does raise the question of how much we charge,” he said. 

Meritum Financial Group GM Theo Christopoulos told insuranceNEWS.com.au the life companies haven’t caught up with the problems of still paying life commissions in the new remuneration model.

“Paying commissions is a difficult area in the fee-for-service model,” he said.

“We have always been paid level commissions on life insurance, but the product situation is changing under the Future of Financial Advice reforms and that is making it difficult.”

Mr Christopoulos says allowing commission on life sold outside super while banning it within super will create difficulties for both advisers and their dealer groups.

Seaview Consulting Director Bob Neill says some dealer groups are packaging all their services together to charge a fee for service, but are rebating the insurance commissions.

“The public accepts advice delivered around a service, but it will be hard to bundle a commission into that model,” he told insuranceNEWS.com.au.

“I don’t know how dealer groups will unbundle life insurance commissions from the pricing model.”

Mr Neill agrees the current life insurance product design doesn’t allow for a fee-for service payment.  

“Insurance delivers a known outcome so I think people accept the commission payment,” he said. “But one problem we see is not being allowed a commission for insurance sold in super leading to advisers not providing this advice.

“Human nature being what it is will see the adviser going for the easier payment solution. This will be another impediment to consumers getting good advice.”

Mr Neill says dealer groups will have to look at the amount of work the adviser puts into providing advice on a life product and whether the remuneration is enough.

“You have to look at the amount of work being put in for an unsustainable reward which will disappoint,” he said.

“We are seeing some dealer groups now charging a fee, usually about 1% of the claim, to manage the process of recovering the cost of ongoing advice.”