Insurance options are scarce and unsatisfactory in the market.
In the German insurance market, the trend of fee-based advice is gradually emerging, driven by regulatory reforms and growing consumer demand for transparency. A recent study by Liechtenstein Life, "Net policies and the status of fee-based advice 2021," reveals that while fee-based advice accounts for less than half of the total business in three out of four cases, nearly one in five (19 percent) have a share of over 80 percent.
Digital distribution and direct channels are becoming increasingly important in the insurance brokerage industry. Regulatory pressures, such as the Insurance Distribution Directive (IDD), elevate product-suitability duties, encouraging more transparent advice models. This shift could support a move towards fee-based advice.
However, traditional brokers and agents still play a significant role, particularly offline. The health insurance market, for example, sees a large share controlled by brokers and agents who support direct purchases. This suggests that commission-based models may still be prevalent in many segments.
The challenges for fee-based advice include client acceptance and willingness to pay explicit fees rather than commissions. Competition from digital platforms offering lower-cost or embedded advice also presents a hurdle. Insurers and brokers must demonstrate clear added value and trust to justify fees.
Remuneration structures are evolving, with a gradual move towards hybrid models combining commission and fees, particularly in complex products or advisory-intensive cases. Pure fee-based models are more common among premium, specialized, or institutional clients rather than mass retail markets.
Demand for fee-based advice is growing due to increased regulatory emphasis on product suitability and transparency, rising consumer awareness, the complexity of insurance products amid evolving ESG and sustainability requirements, and demographic factors pushing for personalized retirement and health insurance solutions.
Despite the challenges, the study indicates a positive outlook for fee-based advice. One in ten (10 percent) brokers have their fee-based advice pre-financed via factoring. Every second survey participant cited the conflict-minimizing effect on consumer protection as an advantage of fee-based advice. Among brokers offering fee-based advice, 61 percent regulate their remuneration as a consulting service via an hourly rate.
The majority of traditional brokers (60 percent) can imagine offering fee-based advice in the future. Among all surveyed brokers, 23 percent express an increasing demand for fee-based advice. However, many brokers (60 percent) have not yet started offering fee-based advice, and the study did not provide information on the percentage of brokers who do not offer fee-based advice at all.
Among those with a hybrid business model, 43 percent see an increasing demand for fee-based advice. The study did not indicate whether the demand for fee-based advice among traditional brokers is increasing or decreasing. The survey did not ask about the challenges brokers face when offering fee-based advice, beyond the lack of suitable insurance products.
Concrete plans to start offering fee-based advice within the next 12 months are held by 17 percent of brokers. Among those with a hybrid business model, the percentage of brokers who have started offering fee-based advice was not specified. Among all surveyed brokers, 28 percent of brokers offering fee-based advice offer it through fee-based advice platforms.
In summary, while fee-based advice in German insurance brokerage is gaining attention driven by regulation and customer demand for transparency, it remains a niche approach challenged by traditional commission structures and digital distribution growth. Remuneration is shifting gradually towards mixed models, and success depends on demonstrating clear advisory value amid evolving market and regulatory conditions. The study surveyed over 150 insurance brokers in Germany.
- In response to regulatory pressures and increasing consumer demand for transparency, remuneration structures in the insurance brokerage industry are shifting towards hybrid models, combining commissions and fees.
- The study "Net policies and the status of fee-based advice 2021" suggests that while fee-based advice is still a niche approach in the German insurance market, its demand is growing, with one in ten brokers having their fee-based advice pre-financed via factoring.
