The perception that advisers receive 120 per cent upfront commissions on risk advice is incorrect and not a true indication of what advisers are actually paid, says Life Insurance Direct.
Research conducted by the life insurance comparison company – based on an analysis of 3,000 policies across 10 life insurers – showed that while an adviser might write based on a 120 per cent commission model, they will not actually get the entire value of the commission.
For example, Life Insurance Direct said a 120 per cent commission paid by the insurer includes GST, which is paid to the ATO, not to the adviser.
"Life insurers generally don't pay commissions on frequency loadings (6-9 per cent), policy fees ($5.61 – $8.82 / month) or stamp duty (0-10 per cent) but these are included in the mythical '120 per cent' cited by these companies," a statement from Life Insurance Direct said.
"Excluding these elements means the average commission received for the policy implementation is closer to 89.83 per cent."
Life Insurance Direct chief executive Russell Cain said understanding the true amount that advisers take home will indicate what the proposed life insurance framework will mean for advisers.
This prompts questions about how much consumers should be paying for life insurance, he said.
"Reforms that ultimately reduce competition may have a significant negative impact on consumers," Mr Cain said.
"Unfortunately, the empirical data and intuitive tools available from lifeinsurancedirect.com.au indicate that the interests of consumers may not be served at all well by the reforms."