The Financial Planning Association (FPA) has placed risk insurance outside of its new fee-for-service model to avoid disadvantaging consumers.

The decision follows an earlier FPA edict that members stop receiving commission-based fees for advice from July 2012 and instead move to a fee-based structure.

The FPA last week announced that policy won’t apply to products such as life insurance.

Its evaluation of risk products found that a fee-for-service model would result in a high cost of advice for life cover and add to levels of underinsurance.

“Until we are able to deduct the costs of up-front fees as a tax deduction, commission-based advice remains the most cost-effective manner by which the widest range of consumers can secure insurance cover,” FPA CEO Jo-Anne Bloch said.

The FPA says its investigation found no link between commission payments and cases of mis-selling or conflicts within the life sector.

It says much work needs to be done at a product level “to be able to facilitate a move away from commissions to fees for risk products”.

Instead, it advocates five of six FPA remuneration principles that are designed to aid consumer understanding, comparability and transparency in the disclosure of insurance fees.

A sixth principle prohibiting payments from product manufacturers was deemed unworkable, but those favoured include separation of fees between advice and product and an allowance for consumers to “switch off” fees in the absence of ongoing advice.