Insurers currently pay around $10-15 million per year in shelf space fees, a burden that is passed back to policyholders, claims ClearView.
In ClearView’s response to questions on notice from the Parliament Joint Committee inquiry into the life insurance industry, it said the shelf space fees of dealer groups under AMP – AMP Financial Planning, Hillross and Charter – total some $500,000.
Securitor Financial Advisers, under Westpac/BT Financial Group, has shelf space fees of around $150,000, while Aon Hewitt Financial Advice has around $80,000.
For Professional Investment Services (PIS), under Centrepoint Alliance, shelf space fees total approximately $100,000.
ClearView said the insurers’ ‘pay to play’ model results in a burden that is passed back to policyholders.
“Vertically-integrated institutions use restricted approved product lists (APLs) to influence advice and channel customers into in-house products,” it said.
“Therefore, not only do consumers foot the bill for the impact of shelf space fees but many are unknowingly receiving poor quality, conflicted advice.
“Furthermore, the cross subsidies between institutional insurers and their licensees create inefficiencies in the system which can only be detrimental for consumers.”
Previously, ClearView managing director Simon Swanson told the committee about the major conflicts of interest surrounding approved product lists, including shelf space fees.
“Well, basically you go along and you pitch to a company your credentials as a product provider and they will say, in some cases, the fees are up to $650,000 per annum, in some cases, $80,000 per annum and so on. It’s just a straight bribe,” Mr Swanson said.
“It should be neutral where the product is placed based on the needs of the customer.”