Consumer NZ has released its latest annual insurance survey.

It said people who bought insurance from a bank or adviser were less likely to be satisfied. People who bought insurance direct – whether that was life or general cover – were more likely to be satisfied.

Chief executive Sue Chetwin said sales incentives and commissions paid to bank staff and insurance brokers were likely a major factor behind the difference.

“In the life insurance industry, brokers’ commissions can be as high as 200% of the customer’s premium. A broker chasing another commission to boost their income is going to do what’s best for them, not what’s best for the consumer,” she said.

Katrina Shanks chief executive of Financial Advice New Zealand rejected that. “It’s a very naive statement, and it’s also based on an outdated review.

“Financial advisers have clients’ interests top of mind and ahead of their own, and the sector’s current code of conduct will be further strengthened by the Financial Services Legislation Amendment Act, which comes into force in July, and which will demand a higher standard of care and transparency for all advisers.

“The first obligation of financial advisers under the revised Professional Standards is to treat clients fairly, over and above their own or product provider interests.

“They’re required to understand clients’ needs and ensure they’re fully aware of the nature and scope of the advice, to provide advice that’s suitable, and that they have time to absorb it. This includes disclosure on how commissions work.

“Consumer NZ’s advice to consumers to switch companies purely to save money is also naive and misleading. Unlike switching between power companies, there are major risks to switching insurance policies, which require expert advice by a financial adviser. Key risks include such things as non-disclosure, pre-existing cover, and policy wording. Consumers could be left with inappropriate and inadequate insurance cover or, even worse, no cover at all.”

She said the Consumer NZ report on their annual insurance survey also drew some long bows around commissions and conflicts of interest.

“Taking aim at conflicts of interest created by commission-based selling also shows a lack of understanding.

“Advisers are well aware of the issue of conflicts of interest, and they are actively managed.

“The current commissions model has been reviewed by the Minister of Consumer Affairs, officials, and the sector in the past year, and [they] have all agreed it’s a viable model.

“Commissions, as a form of remuneration, help maintain a sustainable business model for advisers so they can continue to provide New Zealanders with low-cost advice on how to increase their financial health, wealth and wellbeing.

“Consumer quotes an old review – from January last year – that’s been superseded by recent policy direction and ministerial statements in relation to volume-based incentives.

‘There’s no evidence commissions cause significant additional costs or harm to consumers or encourage poor adviser behaviour.

“Consumer’s claim there is a lack of insurer oversight and responsibility for sales and advice where life insurance is sold through a broker also quotes from last year’s report, which has also been superseded by Cabinet policy and the new Financial Markets (Conduct of Institutions) Amendment Bill, which has been tabled in the House. The bill carves out insurance companies having oversight and responsibility for the advice process because that’s been covered by the FSLAA legislation.”

There were 5,266 Consumer NZ members involved in the survey. Car insurance had the highest satisfaction rating, at 65%. Life insurance was the lowest, at 36%.