Financial Advice NZ has hit back at criticism by a consumer group for suggesting life insurance advisers knowingly persuade clients to change policies just to increase their commission payments.
In a press release Consumer NZ’s CEO Sue Chetwin says: “In the life insurance industry, brokers’ commissions can be as high as 200 percent of the customer’s premium. A broker chasing another commission to boost their income is going to do what’s best for them, not what’s best for the consumer.”
Chetwin also advises consumer to shop around for a better deal.
However, Financial Advice NZ’s CEO Katrina Shanks says buying insurance is not like switching power companies.
Shanks says: “Consumer NZ’s Annual Insurance Survey report “draws some long bows around commissions and conflicts of interest”.
“The current commissions model has been reviewed by the Minister of Consumer Affairs, officials, and the sector in the past year, and have all agreed it’s a viable model.”
Shanks also says the Consumer NZ report relies on a January 2019 review that’s been superseded by a policy direction and ministerial statements in relation to volume-based incentives.
Shanks says: “Consumer NZ’s claim there is a lack of insurer oversight and responsibility for sales and advice where life insurance is sold through a broker also quotes from last year’s report, which has also been superseded by Cabinet policy and the new Financial Markets (Conduct of Institutions) Amendment Bill, which has been tabled in the House.
“The bill carves out insurance companies having oversight and responsibility for the advice process because that’s been covered by the FSLAA legislation.”
Shanks also takes issue with Consumer NZ’s advice to policy holders to switch companies to save money.
“Unlike switching between power companies, there are major risks to switching insurance policies…Key risks include such things as non-disclosure, pre-existing cover, and policy wording. Consumers could be left with inappropriate and inadequate insurance cover or, even worse, no cover at all.”