The report was conducted by insurtech platform Key Person Risk Management. It estimates the cost of removing commissions and replacing it with a fee for service basis (which will amount to between $600 and $1,500 a year for ongoing arrangements) is likely to make the service unaffordable for most consumers.

This could lead to extremely negative outcomes, with only the wealthy affording life insurance, and the possibility of an industry collapse.

“If restrictions are placed on a consumer’s ability to access and afford advice, the social and community impacts will result in broader under-insurance, financial hardship for people in their time of need, and an increased demand on the welfare system,” says Helen Blackford, chief executive of IOOF dealer groups Lonsdale and Millennium3.

David Whyte, chair of financial advisory firm Lifetime, agrees that any such move is likely to be deleterious for both the life insurance industry and the Australian public. He points to the example of Holland, where the commission structure was shelved in favour of a simple fee structure.

“Consumers stopped seeking advice, it left a huge hole, and more people became dependent on the public healthcare system, as only the wealthy were able to afford the associated fees,” he says.

Whyte is reassured, however, by previous Commerce and Consumer Affairs Minister, Kris Faafoi’s statement recognising the value of the commission-based model. 

“He stated that the structure worked in favour of the clients. I think the prospect of the Australian experience being repeated in New Zealand is remote.

“But we recognise that the difficulties our friends in Australia and elsewhere are having: and I would be very opposed to any suggestion of putting such a system in place here.”