Life Insurance customers don’t want to pay for advice
Life insurance purchasing can be extremely complicated, and many people find that they are not sure which the best policy is for them. With the choice between term and whole life insurance, and then the decision to pick between reducing and fixed term cover makes the whole process somewhat complicated.
Despite the complications many people found, a recent survey by accounting specialists, Ernst and Young found that 45% of Britons would still not be willing to pay for advice on life insurance and pension products.
The research was part of the companies Dawn of an Era research paper and saw 1000 different life insurance and pension customers from the UK questioned about their policy purchase preferences.
The paper has been commissioned in preparation for the new changes as part of the Retail Distribution Review. From the beginning of 2013 all customers seeking advice will be issued with a clear charging system before they take any advice, so they know exactly what they will be paying.
All financial advisors will have to make it clear to the customer which charges will apply to them, how much they will cost and how much the advisor is making from each transaction, in a more designed to add a lot more transparency to the market.
The biggest difference for consumers will be the way they pay for their advice. Advisors at the moment claim their income from commission for selling products, and consumers don’t pay directly for the advice. Under the new rules consumers will have to pay a fee for the advice they receive.
The research found that a further 19% of life insurance and pension customers would prefer to have the fees for the advice deducted as part of payments for the policy, whilst another 12% were happy to pay a fee upfront.
The report explained, “The survey points to a dilemma for customers: they want to take control over the buying process, and don’t want to have to rely on someone ‘selling’ to them, and yet they feel they have to use an adviser because of the complexity of the purchase. This dilemma is likely to be compounded by the RDR.”
Currently around a third of those buying life insurance do not use an advisor, using websites like lifeinsurancequotes.co.uk to find the cheapest policy for themselves, saving money in the process.