Consumers are being charged well over their first year premium in commission on their life assurance policies, according to an Amarach Research survey.
The survey of 1,000 people found that consumers are oblivious to the fact that they are paying an average of 118% of their first year’s insurance premium in commission.
The survey found that four out of five people believe that they are only charged up to 40% of their first year’s premium in commission, nearly a third of the actual figure.
Managing director of Lowcommission.ie, Peter O’Reilly, said the findings were an example of how poorly informed consumers are of the fees that they pay.
"These research findings confirm that the vast majority of consumers who buy insurance products such as life assurance, mortgage protection, serious illness insurance and income protection have no idea how much they pay in commission to brokers, banks and direct channels," he said.
Despite the introduction of an EU transparency directive in 2007 that is supposed to force firms to reveal their commission charges, consumers are still not aware of the fees that they are paying.
"There is a staggering lack of appreciation amongst consumers despite the obligations on those charging commission to be absolutely transparent with their customers. The knock-on effect is that consumers are not sufficiently well informed to make a judgement on whether they are getting value for money and have not been, to date, sufficiently motivated to shop around for best value in the market," said Mr O’Reilly.
However, there was an increasing trend towards consumers becoming more "value savvy", and there should be a way for them to buy policies without having to pay for advice.
"The commission received by brokers or banks is ultimately a payment for the advice and assistance the consumer receives. However, as this research demonstrates, consumers either don’t know or seriously under-estimate the cost of this service. For there to be genuine choice in the Irish market consumers should be in a position to either pay for the advice and assistance provided by a broker, or to choose themselves to buy a policy which meets their needs without paying excessive rates of commission," he said.