Premium inflows from advisers could drop by 30-40% if the Trowbridge report’s recommendations on life insurance remuneration are adopted, a research house has warned.

Dexx&r estimates it costs about $3000 to provide the advice component when selling a life insurance policy.

This includes meetings with clients, fact-finding, needs analysis, research, preparation of recommendations and completion of new business requirements, which may include arranging medicals, statements of financial position and follow-ups as required.

It estimates the average premium per client needs to be $2500 to cover upfront commissions.

Under the Trowbridge recommendations, the average premium per client would need to be $9000, Dexx&r says.

The research house says a $2500 annual premium will provide $2.6 million in death and trauma cover for a non-smoking, white-collar, 35-year old man.

A $9000 annual premium will provide $9.5 million of cover, although the maximum standard trauma cover that can be bought is currently $5 million.

“Under the Trowbridge recommendations, an adviser would only cover their current cost of advice if they were selling to the top end of the high-net-wealth market,” MD Mark Kachor said.

“Servicing the middle-income market would only be possible for advisers with access to significant capital resources and the ability to spread recovery of their first-year new business costs over an eight or nine-year period.”

He says the capital required for advisers to stay in the life insurance market would inevitably lead to many abandoning the sector.