Julian Knight: Why we have to ring the changes in life insurance

And, while we're about it, let's get rid of commission-based selling, too

As regular as clockwork, whenever I call my mortgage provider they try to sell me life insurance.

I turn it down on the basis that I'm unmarried with no children. But few people are that rootless, and life insurance for many is a financial must-have. Yet only a minority actually have it, despite the fact that it's cheap and can be tax efficient. How to get more people to buy life insurance then?

Trevor Matthews, the chief executive of Friends Provident, has an idea and that is to allow employers to provide access to life cover through the framework of the personal accounts system, due to be launched in a little over two years' time. Mr Matthews has an agenda, of course. Friends Provident is one of the country's biggest providers of ... guess what? Life cover. In addition, it will be in the forefront of those firms managing the new personal accounts. No doubt he can hear the tills ringing – but it's a good idea.

Life cover is usually bought as an add-on to a mortgage or done through a financial adviser who may receive commission (more of this below); neither is always satisfactory. If an employer can offer voluntary access to life cover with premiums deducted from staff pay packets, we will see a surge in the numbers taking out this insurance. Also, big employers should be able to negotiate a cheaper deal.

I'd go further and let people pay premiums from their pre-tax salary – in effect, giving tax relief on contributions. Why? Well, those likely to be covered by personal accounts will be on low to moderate incomes. Providing an incentive to them to insure for their families should they die will ultimately help prevent recall to the state.

Don't forget adviser fees

In life, whoever pays the piper calls the tune. I have seen one mis-selling scandal after another, all with the common denominator that those who advised the public to buy the products earned a whopping commission. Some of the worst examples followed the sale of so called precipice bonds around the turn of the century. Put simply, advisers incentivised by commission sold the bonds to people looking for extra income in retirement without making it clear that they were high-risk investments. The inevitable happened, the market moved against the investments and thousands had their life savings wiped out. Unless we get rid of commissions, history will repeat itself – I already have my fears about some so-called "structured products" flogged by advisers at the moment.

The Financial Services Authority, in its catchily titled Retail Distribution Review agrees, and wants an end to commission by 2012. The big idea is people knowing precisely how much advice will cost them and being given the option of paying upfront or having it deducted from their investments. This is a decision long, long overdue. The difficulty is that many consumers don't want to pay for financial advice, hence we will end up in a situation where financial advice may only be for the rich. As well as getting rid of commission, we need to review the level of fees charged. In this country, financial advice is priced as a premium product and hence is inaccessible to many who need it the most.

A friend of mine was recently offered access to a financial advice firm by her employer. The firm wanted £200 per hour for the services of a financial adviser who had only the most basic qualification. That is a rip-off. We are not talking barrister time here.

We need what Otto Thoresen, the chief executive at Aegon, suggested last year – a nationwide financial advice network paid for by a levy on the financial services industry. Anyone would be able to get independent advice on significant life events such as buying a house, having a baby, divorce or retirement. Most advice doesn't have to be that in-depth, and the existence of such a service may well lead to some advisers reviewing their fees or specialising in particular areas, such as tax.

Let's hope that the end of commission is in sight and let's focus on how we get independent advice out to more people at a price they can afford.

There were mass celebrations across Argentina as the country's national team reached their first World Cup final for 24 years
transfersOne of the men to suffer cardiac arrest was 16 years old
Life and Style
life“What is it like being a girl?” was the question on the lips of one inquisitive Reddit user this week
peopleDave Legeno, the actor who played werewolf Fenrir Greyback in the Harry Potter films, has died
Mario Balotelli, Divock Origi, Loic Remy, Wilfried Bony and Karim Benzema
transfersBony, Benzema and the other transfer targets
Have you tried new the Independent Digital Edition apps?
Life and Style
Swimsuit, £245, by Agent Provocateur

Diving in at the deep end is no excuse for shirking the style stakes

Detail of the dress made entirely of loom bands
Life and Style
Arts and Entertainment
Armando Iannucci, the creator of 'The Thick of It' says he has
tvArmando Iannucci to concentrate on US show Veep
German supporters (left) and Argentina fans
world cup 2014Final gives England fans a choice between to old enemies
Arts and Entertainment
A still from the worldwide Dawn of the Planet of the Apes trailer debut
peopleMario Balotelli poses with 'shotgun' in controversial Instagram pic
A mugshot of Ian Watkins released by South Wales Police following his guilty pleas
peopleBandmates open up about abuse
Basketball superstar LeBron James gets into his stride for the Cleveland Cavaliers
sportNBA superstar announces decision to return to Cleveland Cavaliers
Javier Mascherano of Argentina tackles Arjen Robben of the Netherlands as he attempts a shot
world cup 2014
Arts and Entertainment
The successful ITV drama Broadchurch starring David Tenant and Olivia Coleman came to an end tonight
Four ski officials in Slovenia have been suspended following allegations of results rigging
sportFour Slovenian officials suspended after allegations they helped violinist get slalom place
14 March 2011: George Clooney testifies before the Senate Foreign Relations Committee during a hearing titled 'Sudan and South Sudan: Independence and Insecurity.' Clooney is co-founder of the Satellite Sentinel Project which uses private satellites to collect evidence of crimes against civilian populations in Sudan
Arts and Entertainment
Balaban is indirectly responsible for the existence of Downton Abbey, having first discovered Julian Fellowes' talents as a screenwriter
tvCast members told to lose weight after snacking on set
Life and Style
More than half of young adults have engaged in 'unwanted but consensual sexting with a committed partner,' according to research
Life and Style
A binge is classed as four or more alcoholic drinks for women and five or more for men, consumed over a roughly two-hour period
Finacial products from our partners
Property search
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Biztalk - outstanding opportunity

    £75000 - £85000 per annum + ex bens: Deerfoot IT Resources Limited: Biztalk Te...

    Trade Desk Specialist (FIX, Linux, Windows, Network Security)

    £60000 per annum: Harrington Starr: Trade Desk Specialist (FIX, Linux, Windows...

    Service Desk Analyst (Windows, Active Directory, ITIL, Reuter)

    £35000 per annum: Harrington Starr: Service Desk Analyst (Windows, Active Dire...

    Network Engineer (CCNA, CCNP, Linux, OSPF, BGP, Multicast, WAN)

    £40000 per annum: Harrington Starr: Network Engineer (CCNA, CCNP, Linux, OSPF,...

    Day In a Page

    A History of the First World War in 100 Moments: Peace without magnanimity - the summit in a railway siding that ended the fighting

    A History of the First World War in 100 Moments

    Peace without magnanimity - the summit in a railway siding that ended the fighting
    Scottish independence: How the Commonwealth Games could swing the vote

    Scottish independence: How the Commonwealth Games could swing the vote

    In the final part of our series, Chris Green arrives in Glasgow - a host city struggling to keep the politics out of its celebration of sport
    Out in the cold: A writer spends a night on the streets and hears the stories of the homeless

    A writer spends a night on the streets

    Rough sleepers - the homeless, the destitute and the drunk - exist in every city. Will Nicoll meets those whose luck has run out
    Striking new stations, high-speed links and (whisper it) better services - the UK's railways are entering a new golden age

    UK's railways are entering a new golden age

    New stations are opening across the country and our railways appear to be entering an era not seen in Britain since the early 1950s
    Conchita Wurst becomes a 'bride' on the Paris catwalk - and proves there is life after Eurovision

    Conchita becomes a 'bride' on Paris catwalk

    Alexander Fury salutes the Eurovision Song Contest winner's latest triumph
    Pétanque World Championship in Marseilles hit by

    Pétanque 'world cup' hit by death threats

    This year's most acrimonious sporting event took place in France, not Brazil. How did pétanque get so passionate?
    Whelks are healthy, versatile and sustainable - so why did we stop eating them in the UK?

    Why did we stop eating whelks?

    Whelks were the Victorian equivalent of the donor kebab and our stocks are abundant. So why do we now export them all to the Far East?
    10 best women's sunglasses

    In the shade: 10 best women's sunglasses

    From luxury bespoke eyewear to fun festival sunnies, we round up the shades to be seen in this summer
    Germany vs Argentina World Cup 2014: Lionel Messi? Javier Mascherano is key for Argentina...

    World Cup final: Messi? Mascherano is key for Argentina...

    No 10 is always centre of attention but Barça team-mate is just as crucial to finalists’ hopes
    Siobhan-Marie O’Connor: Swimmer knows she needs Glasgow joy on road to Rio

    Siobhan-Marie O’Connor: Swimmer needs Glasgow joy on road to Rio

    18-year-old says this month’s Commonwealth Games are a key staging post in her career before time slips away
    The true Gaza back-story that the Israelis aren’t telling this week

    The true Gaza back-story that the Israelis aren’t telling this week

    A future Palestine state will have no borders and be an enclave within Israel, surrounded on all sides by Israeli-held territory, says Robert Fisk
    A History of the First World War in 100 Moments: The German people demand an end to the fighting

    A History of the First World War in 100 Moments

    The German people demand an end to the fighting
    New play by Oscar Wilde's grandson reveals what the Irish wit said at his trials

    New play reveals what Oscar Wilde said at trials

    For a century, what Wilde actually said at his trials was a mystery. But the recent discovery of shorthand notes changed that. Now his grandson Merlin Holland has turned them into a play
    Can scientists save the world's sea life from

    Can scientists save our sea life?

    By the end of the century, the only living things left in our oceans could be plankton and jellyfish. Alex Renton meets the scientists who are trying to turn the tide
    Richard III, Trafalgar Studios, review: Martin Freeman gives highly intelligent performance

    Richard III review

    Martin Freeman’s psychotic monarch is big on mockery but wanting in malice