MAJORITY OF LIFE INSURANCE CUSTOMERS DON'T KNOW HOW MUCH COMMISSION THEY PAY


We're delighted to present this study carried out be Amarach Research in December 2012.

The vast majority of Irish consumers who buy life insurance products have no idea how much commission they pay
Value savvy consumers who shop around are making large savings

Market research into insurance policy ownership in Ireland undertaken on behalf of Low.ie has determined that:

  • 43% of Irish adults surveyed have life insurance.
  • Of those who have life insurance, 44% have no idea how much commission they pay on their policies.
  • Of those who felt they know how much commission they pay: 
    • Three in every five believe the payment was up to 20% of their first year’s premium.
    • Four in every five believe the payment was up to 40% of their first year’s premium.
  • The actual average Irish market commission on a life insurance policy is 118%¹ of the first year’s premium.
The research was carried out by Amarach Research in December 2012 amongst 1,000 Irish adults, with a sample profile representative of the Irish population.

“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” says Peter O’Reilly, Managing Director of Low.ie, the online insurance provider. “This staggering lack of appreciation amongst consumers exists 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.”

“Irish policy holders have not traditionally been value savvy when seeking life cover or other forms of protection, however this is beginning to change” says Peter O’Reilly. “Consumers seeking life and other insurance cover are becoming more financially literate and more comfortable with researching and shopping online. We have seen clear evidence of this through our site since we launched last November.”

He continues: “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.”

The breakdown of the research findings are as follows:

43% had life insurance
 When asked how much commission they paid in their first year’s premium:

  • 44% said they do not know
  • 33% believed they paid 0 - 20%
  • 11% believed they paid 21- 40%
  • 4% believed they paid 41 - 60%
  • 3% believed they paid 61 – 80%
  • 5% believed they paid 81 – 100%
23% had mortgage protection
When asked how much commission they paid in their first year’s premium:

  • 46% said they do not know
  • 32% believed they paid 0 - 20%
  • 11% believed they paid 21- 40%
  • 5% believed they paid 41 - 60%
  • 3% believed they paid 61 – 80%
  • 3% believed they paid 81 – 100%
17% had serious illness cover
When asked how much commission they paid in their first year’s premium:

  • 46% said they do not know
  • 33% believed they paid 0 - 20%
  • 10% believed they paid 21- 40%
  • 3% believed they paid   41 - 60%
  • 4% believed they paid   61 – 80%
  • 4% believed they paid   81 – 100%
7% had income protection
When asked how much commission they paid in their first year’s premium :

  • 44% said they do not know
  • 38% believed they paid 0 - 20%
  • 12% believed they paid 21- 40%
  • 4% believed they paid 41 - 60%
  • 0% believed they paid 61 – 80%
  • 2% believed they paid 81 – 100%
Demographic:
49% male / 51% female

  • 16-24 years: 17%
  • 25-34 years: 22%
  • 35-44 years: 19%
  • 45+ years: 16%
Percentage of first year premiums paid as commission in Ireland
  1. As of January 2013, the percentage, on average, of a life insurance policy’s first year premium being paid in commission by insurance providers in the Irish market was:

 | Aviva Ireland | 140%
| Friends First | 120%
| Irish Life | 100%
| New Ireland | 120%
| Zurich Life | 120%
| Caledonian Life | 133%
| Canada Life | 90%
 

[1] Source: Insurance providers’ commission specifications 

Low.ie generates revenue through taking a very low level of commission payments from the insurance companies. It takes no more than 20% of the initial commission paid by the life company and uses the balance foregone to reduce the premiums the consumer pays thus yielding sizeable savings to consumers over the life of their policy. They have a price promise to beat any quote from a provider in the Irish market on mortgage protection, life insurance, serious illness cover and income protection.