Life companies may need to diversify their distribution channels beyond small IFAs to survive the RDR's commission ban, a study by Fitch Ratings concludes.
Banning financial advisers receiving sales-based commissions from insurers represents a "step-change" in how investment advice is paid for in the UK, it says.
The resulting shift of some customers away from the IFA sector and towards cheaper, restricted advice will grow the market for non-intermediated sales of simple investment products, giving bancassurers an opportunity to gain market share, the ratings agency says.
"Insurers that offer simple investment products through low-cost channels stand to gain from the RDR, while those that are dependent on small adviser firms to sell policies stand to lose out," says David Prowse, senior director in Fitch's Insurance rating group.
Although Fitch believes IFAs will "continue to be the dominant sales channel for insurers' investment products", the warning could see life companies, as well as customers, abandon advisers in favour of cheaper direct-to-consumer sales methods.
From a credit quality perspective, Fitch says the RDR seems unlikely to materially affect UK life insurers in aggregate.
However the agency believes the impact on some individual companies could eventually be significant.
"Insurers that offer simple investment products through low-cost channels stand to gain; those that are overdependent on small adviser firms stand to lose."
Data quality is key
Granted leave to appeal the judgement