Platforms' commission question

Platforms offering no advice receive the same insurance commission rates as financial advisers offering personalised guidance on insurance products.

Wednesday, February 28th 2018, 9:00AM

The Financial Markets Authority is now taking applications from providers who want to offer roboadvice under its exemption.

Russell Hutchinson, of QuoteMonster, said the fact they would receive the same remuneration per policy as human advisers reinforced the idea that insurance commissions were a payment for a sale.

“Financial advisers are essentially saying I’m using that to cover the cost of advice as well.”

Milton Jennings, former chief executive of Fidelity Life, said insurers would pay the same commission to an adviser and a platform to avoid any conflict between the distribution channels.

“They try to keep the commission the same, they might do different deals but it depends what they’re selling.”

Partners Life managing director Naomi Ballantyne said platforms could choose to dial down commissions to reduce the price to the customer, as advisers could.

Jaime Monaghan, head of insurance at TradeMe, which runs the LifeDirect platform, said it had a different value proposition.

“Kiwis use us because they want to compare the prices, benefits and other features of different insurance products and providers in one place to ensure they're getting the cover they need for their circumstances.

“With LifeDirect there are no appointment times or closing hours we're there 24/7 for consumers to take a look and do their research. We appreciate that people are busy, so we've built a responsive website that's easy to use on a mobile device as well as on a desktop. We're also available through LiveChat or on the end of the phone if clients need any assistance filling out their application forms.

“We also acknowledge that the client is doing some of the work themselves which is why we offer a 20% cashback for life insurance, income protection and mortgage insurance policies.”

Monaghan said, while LifeDIrect did not offer advice at this stage, it was something that was being investigated.

Insurance commentator Michael Naylor, of Massey University, said few platforms offered adequate advice or personalisation.

“Therefore buyers tend to be confused and buy inadequate policies based on the first-year commission, which is often discounted. There is no help if life circumstances change. This means polices have a shorter lifespan and clients are not as high quality. So insurers are not as keen to get the business of direct platforms. On the upside these may be clients who would not otherwise buy. The direct platforms also seem to have surprisingly high costs of client acquisition, so are not as profitable as they would seem."

Tags: Insurance Advisers LifeDirect Milton Jennings Naomi Ballantyne roboadvice