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Study finds link between advisers and under-disclosures

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Life insurance sold through the adviser channel has a higher level of under-disclosure than policies bought directly from insurers, new research has found.

The Adviser Effect On Insurance Disclosures study is based on applications for disability, total and permanent disability, trauma and life policies between November 2014 and December 2018 with an Australasian insurer.

“We argue that the adviser, who receives a commission when a contract is accepted, may be motivated to influence disclosures in order to increase the chance of an accepted contract in affordable terms and therefore maximise own returns,” the study says.

“By doing so, the adviser exposes the customer to legal remedies whereby the insurance company may cancel the contract or refuse a claim.

“Our results support the findings of various inquiries that call for an end to commission-based sales.”

Dr Doron Samuell, Director of the economics group Behaviour and co-author of the study, says the current sales-driven commission structure needs to be realigned towards customer outcomes.

He says personal information should only be collected by insurers.

“Our conclusion is that obtaining personal information through an adviser lowers the disclosure rates…to an implausible level,” Dr Samuell told

“That is not good, because it means insurers are taking on risks they are unaware of and they have not provisioned for. We believe that the low disclosures are contributing to the sustainability problem of disability insurance.”