A research by Canada Life Group Insurance has found an overwhelming majority of intermediaries favouring commission options available in the market place.
More than 90 percent of insurance IFAs will choose commission remuneration option, the poll of 163 IFAs showed. 35 percent of the respondents chose commission as percentage of the premium as a preferred payment model.
More than half (56 percent) of intermediaries prefer monthly payments while nearly one in four (26 percent) of the respondents would prefer to receive payments annually.
“With the distribution of group risk products under scrutiny in an era of the retail distribution review, Nest and welfare reform, we wanted to understand how advisers felt about their levels of remuneration for selling group risk products”, said Paul Avis, sales and marketing director at Canada Life.
“It is important that the industry continues to assess the suitability of products and whether the level of remuneration flexibility is adequate to encourage and sustain market growth”, Avis said.
“The ability to opt for higher commissions (up to 30 per cent of annual premium) on smaller schemes means that intermediaries feel they are adequately remunerated for the work that they put in.
“Today’s remuneration model gets the thumbs-up for the time being at least, but there are a number of interesting challenges approaching that may mean that we need to review what is on offer”, he added.
The FSA has criticised large financial institutions and banks for designing their business models around aggressive selling tactics.
FSA interim managing director of the business conduct unit, Margaret Cole rejected British Bankers’ Association executive director of retail Eric Leenders’ earlier claim that a lot of customers still trusted high the street banks, at a conference held in London by Which? on financial services reforms.
“I am not in the business of banker banking, but I do have to say if you look at the evidence unfortunately in relation to payment protection insurance, which has been the most recent saga, it was really the big retail banks who were the major players”, Cole said dismissing BBA’s claim.
She said excluding the recent PPI scandal of £9 billion, misselling has cost British consumers £15 billion in the last two decades alone.
The newly approved Financial Conduct Authority, due to start operations from 2013, will have greater powers to ban ‘toxic’ products and intervene earlier to prevent consumer detriment she said, and urged the banks to develop “cultural responsibility” so that less regulatory intervention is required in the first place.
“It is particularly striking to me that when we have been doing more business model analysis we see how much of the business models of major institutions are being driven by aggressive product sales. If that remains the business model there is always going to be a high risk of misselling of products”, said Ms Cole.
“We have to be prepared in the new culture of the FCA to be more interventionist to head off those issues before they really get going”, she added.