Commission ban would be bad for advisers: Ailo
Revisions to the European Insurance Mediation Directive’s proposals to ban commission payments to insurance intermediaries have raised “deep concerns” for the Association of International Life Offices.
A spokesman for Ailo, which represents the interests of more than 50 EU and European Economic Area life insurance companies, said he thought the removal of commission might lead to a contraction in the advice market.
The proposals, known as IMD2, were announced earlier this month alongside the Prips directive, which is designed to give investors clearer information documents to enable them to make more informed investment decisions.
Despite welcoming plans to clarify the definition of a tied intermediary, and proposals to allow tied intermediaries to offer competing products from other insurers, the spokesman said: “We presume the proposal to ban commission is to maintain consistency with the MiFID proposals - which provide harmonised regulation for investment services across the EU - although MiFID will not be voted on until later in 2012.
“Research undertaken by Ailo has revealed that a commission ban can practically eliminate the independent intermediary channel and thus lead to market concentration in tied channels.”
He said this was clearly to the detriment of consumers, as they would lose access to independent advice and cannot benefit from the product competition that results from a strong independent channel.
The spokesman added: “Given the negative competitive impact of such a ban Ailo will urge policy makers to reconsider whether other measures, such as high qualification standards and appropriate suitability and disclosure rules, present a better alternative to address conflict of interest concerns in relation to commission.”
Raj Shah, principal of Sheffield-based Blue Wealth, said: “If I had the option, I would always sell protection products on a fee basis rather than commission.
“There is little risk of clawback and the client gets the best available premium. I think it also makes the market more transparent and gives the client more choice.”
Matt Morris, head of media relations at London-based Baigrie Davies LifeSearch, said: “They would have to be barking mad to get rid of commission on protection products. It would never be sold to the level it currently is. The average man on the street would miss out on good advice and probably look elsewhere if charging was introduced, which could then lead in them taking out inapropriate policies.”