Consumer group Choice accepts advisers have a role to play in the claims process, but it opposes them being paid commissions for selling life insurance.

CEO Alan Kirkland says the claims process is “is really difficult to negotiate” for individuals.

“In an ideal world consumers probably can never negotiate by themselves, and so you would have trusted intermediaries to help consumers, but without some of the risks that sometimes come with that,” he told a Parliamentary joint committee hearing on the life industry.

Liberal committee member Bert van Manen, a former financial adviser, says New Zealand went through the same process examining life insurance commissions – upfront payments there were closer to 200% – but reached a different conclusion to Australia.

“No one yet has demonstrated and none of the reports have demonstrated how changing the remuneration structure is going to produce a benefit for the consumer,” he said.

He asked why Choice has not commented about group or direct life cover, where no commissions are paid.

“Why are you taking one position without any demonstration of public benefit when the Australian Securities and Investments Commission report [on claims] showed the public benefit is actually to have an adviser?” Mr van Manen said.

“Why are you demonising one section of the industry that has demonstrated that it provides the best long-term service to lives insured?”

Mr van Manen says advisers do not charge for handling claims, but the same cannot be said for the legal profession. “We have seen during the past few days any number of representatives from the legal industry here testify that they have built their business on assisting people with insurance claims,” he said.

“This enormously erodes the final value of the insurance payout those people receive on a direct and group basis. Yet I have heard Choice make no comment about that whatsoever.”

Mr Kirkland defended Choice’s stance on conflicted remuneration.

“In terms of Choice’s general policy position, whenever we have looked at conflicted remuneration, we have certainly not said the entire industry is broken or sick or behaving badly for consumers, but we have said there are significant risks shown by the empirical evidence,” he said.

“Some years back we did a shadow shop that showed conflicted remuneration was leading to very poor outcomes for significant numbers of consumers in financial advice.

“The common theme for us is that conflicting remuneration creates significant risks for consumers, and we believe, in the long term, it really does need to be removed from financial services to ensure consumers are adequately protected.”