Call for more transparency

The scrapping of financial adviser commissions has thrown the spotlight on the insurance industry, with calls for more transparency around commissions.

Australia has announced a ban on commissions and payments to financial advisers based on their levels of sales, and in this country, rather than wait for government regulation, Investment Savings and Insurance Association members will voluntarily stop paying commission on investment products. Instead investors will negotiate a fee directly with their adviser.

Insurance Council chief executive Chris Ryan said the move highlighted a significant omission in legislation that meant with general insurance, commissions did not have to be declared.

The council did not necessarily agree with the move to ban commissions but there needed to be debate, he said.

More than $3.5 billion worth of premiums were paid each year. If commissions were worth 20 per cent of that, then it was worth hundreds of millions of dollars.

"People who are buying insurance don't know what commissions they are paying. It seems a very strange omission and we are unclear as to why that has been made.

"It's a question of incentive, transparency, motivation and protection of consumers, in fact it goes to the heart of everything."

A Ministry for Economic Development spokesman said the issue was being considered in the Financial Service Providers (Pre-Implementation Adjustments) Bill.

- NZPA