A dealer group that uses the fee-for-service model says the only way to charge clients for providing life insurance cover is commissions.

“We have used the fee-for-service model since 1986 and I have found it doesn’t work when charging for insurance,” Dixon Advisory MD Alan Dixon told the Financial Services Council conference last week.

“A lot of self-managed superannuation fund clients are 45 years and older.

“It can take between nine and 270 hours to get them cover, which means we would have to charge five times the policy to make it pay. We just take the commission.”

He says underinsurance is a massive problem, and any legislation that increases it is bad policy.

And he is not confident that the debate on life insurance commissions is over, despite Assistant Treasurer Bill Shorten’s announcement last week that he will look again at the proposal to ban commissions on superannuation-linked life insurance.

“We have seen policy drafted into legislation that doesn’t work,” Mr Dixon said.

Colonial First State GM Advice Marianne Perkovic says the industry needs to continue to consult on the commissions ban, because “it is not good policy”.

“While we welcome the changes, we still have to convince the Government it is bad policy,” she told the conference.

“Insurance is about protecting a client’s wealth, and commissions make this affordable.”

Mr Dixon says advisers who offer life insurance services face many risks.

“Advising on life insurance is a high-risk business that is prone to litigation if there is something wrong,” he said.

“Lawyers look for the insurance policy when they are sorting out a client’s estate and if there isn’t enough cover, they sue.”