“Adding a higher commission that is not commensurate with the benefit the adviser provides would be likely to breach these rules.”
The financial watchdog said firms which fail to work to its rules “risk regulatory action”.
'Client's haven't got a clue'
Broker network The Money Group’s recruitment and brand development director, Dave Corbett, a former Primis director, agreed with Baigrie.
He said loaded premiums should be banned. “Clients haven’t got a clue they are paying for a loaded premium.”
He continued: “It’s pure greed lining advisers’ pockets. It’s advisers who ask for this option from the insurers. Our view is that the broker or procurement fee is enough. They don’t need an extra.”
In response to Just’s justification of its choice to operate a loaded premium, Corbett said: “Basically what they’re saying is that the ‘extra training’ their brokers are put through to be more professional is paid for by their end consumer in higher premiums.”
He does point out, however, that many brokers might not even realise they are benefitting from a loaded premium, as it is not a price the adviser sets - rather it comes down to their network, or firm, and the insurers.
Roger Edwards, marketing director at Protection Review and a former managing director at Royal London, likened a loaded premium to "buying a concert ticket and then paying a £6 admin fee on top".
He continued: "If I was a client, I’d want them to tell me what this extra premium is for. Am I getting extra cover? An added service? Access to a GP service? It does need to be justified.”
Edwards reckons consumers do have a choice, “as long as they understand they have a choice”. He concluded: “But if they aren’t aware of the extra, then that doesn’t feel as if it’s being disclosed properly.”
'Academies aren't enough'
Ben Thompson, deputy chief executive of the Mortgage Advice Bureau, agreed with Just that the loaded premium it operates ensures the quality of advice for a consumer.
"A smaller premium results in networks or brokerage firms offering thinner levels of training to advisers," he explained. "It's really important the policy is sold and bought properly. If you don’t take insurance out properly, you’ll be landed with hundreds of thousands of debt."
The implication of a new price set - ie one without loaded premiums - would see the pairing back of risk and compliance for customers, the deputy chief executive explained. "We understand where fair value comes from and it’s a good challenge of the regulator."