The future of life insurance commissions being paid to advisers remains uncertain with the current hung parliament.

Life insurers are urging whichever party wins not to include insurance policies in its proposed commissions ban.

MetLife CEO Marc Lieberman says banning commissions for life insurance advisers would have a “devastating” effect on the industry.

“Insurance is bought and sold, and while there may be changes to the current format of commissions, banning them would be devastating for the consumer,” he told insuranceNEWS.com.au. 

Suncorp Life Executive GM John Crosswell says it’s important to consider the consumer when reviewing the remuneration model.

“It is important commissions stay as a choice,” he told insuranceNEWS.com.au. “Some consumers prefer to pay a commission as it helps them manage their cashflow.”

Mr Crosswell says a shift to other payment methods could lead to significant damage to the life insurance advice sector.

“Flexibility of remuneration structure would allow an adviser to charge an upfront fee if they wish,” he said. “As long as you have transparency with commissions, then that model can work as well.”

The time taken to follow through an insurance proposal for a client is being cited as the main reason for maintaining commissions, as it is seen as a fair way to charge for the service.

It is not unusual for the adviser to spend many hours on a proposal for a client spread over a couple of months.

Mr Lieberman says asking a client for an upfront fee would discourage people from taking out life insurance.

“The adviser wouldn’t spend the time to research the best insurance plan,” he said. “Fee-for-service is a model for investments; retail insurance is very different.”

The Ripoll inquiry into financial services called on the Federal Government to stop payments from the product provider to the adviser.

AIA Group Chief Marketing Officer Chris Wei says his company uses a variable model in Asia for paying advisers, but admits changing a commission-based adviser to a fee-for-service model is not easy.

“The question is, can the adviser change? I believe it would be a difficult transition,” he said.