A row has broken out over the way in which finance minister Paschal Donohue has implemented the new Insurance Distribution Directive that came into force on July 1, with the organisation representing Irish brokers protesting his decision not to allow a commission to be charged.

Brokers Ireland said it was disappointed that Donohoe “has chosen to avail of the discretion to prohibit commission payments in relation to the provision of independent advice for insurance based investments”.

Chief executive Diarmuid Kelly (pictured) claimed that the “robust regulation introduced in recent years has led to greater transparency around charges” and has mitigated any risks to the consumer arising from the commission system.

“Intermediaries who use the term independent are already required by the Consumer Protection Code to explain in detail the payment options available,  fee or commission or a combination of both,” he added.

Kelly called on the government to resist any further curtailment of the commission payment system that might be proposed by the Central Bank, which is further reviewing the system at present.

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“Irish consumers are still struggling with the fallout from the financial crash. Any such decision would lead to those less well off in particular losing out, as they did in the UK when commission was banned in 2012. It would deny consumers’ choice and shrink the availability of impartial and expert advice, leaving people more exposed to product providers who are tied agents,” he said.

Kelly pointed out that Germany and other EU countries had chosen to keep commission payments for independent advisers, as “corporations typically engage in more sophisticated investments and can afford to pay upfront fees, but the average consumer does not and often cannot”.

“Numerous studies have shown consumers who use intermediaries have more valuable pensions and investments, they have more financial protection than those who don’t and they feel more financially confident about the future.”

Kelly omplained that instead of making navigating the field of insurance simpler, Ireland is rapidly increasing the administrative burden consumers and their advisers are forced to take on before accessing impartial advice. 

Kelly concluded: “It has become over-the-top and is altering the nature of the consumer-intermediary relationship in an adverse way.”