Banks will come to dominate the life insurance industry as individual advisers lose clients through moving to the fee-based regime proposed by the Future of Financial Advice (FOFA) reforms.

That’s the conclusion of a survey by Beaton Research, which asked advisers how much business they will write if commissions on life products are banned.

The research found 77% of advisers expect any ban will result in a decrease in the amount of business they write, with only 2% saying an increase will occur.

“Advisers believe banning life insurance sales commissions will result in widespread changes to current market dynamics, competitive landscapes and consumer behaviour,” the Beaton report says.

“Many (advisers) predict a flight to retirement from the industry due to the challenges of selling insurance with a direct fee to end-customers.”

The banks are predicted to replace this exodus of advisers by using large marketing budgets involving TV or other mainstream media to influence customers.

Advisers are also concerned the banks, large insurers and industry superannuation funds will be able to disguise their fees to distort the true cost of the advice, the report says.

Beaton interviewed 528 advisers from across Australia, with 97% saying they sell life insurance products.

Just over 37% of advisers interviewed had 21 years or more experience as a financial adviser, with life insurance contributing an average 33% of their total income.

The survey also asked advisers how life insurance contributed to their income during the past 12 months, and advisers said it provided 54% of their total remuneration.