Concentration of life/risk reaches new high

The Australian life insurance has never been so concentrated in the hands of the big five insurers, according to the latest data from specialist research house, Dexx&r.

The report, released today, concluded that the top five life insurers now dominated the Australian market, noting that once AIA Australia’s acquisition of CommInsure was completed the five largest life insurers would account for 85% of the Australian life insurance market as measured by in-form premiums.

The company’s principal, Mark Kachor noted that in June, 2016, the five largest life insurers accounted for 66% of the total market.

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The Dexx&r analysis said that for the year to June, 2019, the industry wrote $1.13 billion of lump sum new business, down 12.2% on the $1.29 billion recorded in the previous corresponding period, and the lowest value of sales recorded in the past five years.

It said MLC was the only company in the top 10 life companies to record an increase in lump sum new business with a $7.2 million increase,

The analysis said the continued decrease in business was the result of lower sales through advice channels and the suspension or cessation of sales of direct lump sum products by several major life companies.

“This is the lowest level of sales in any June quarter over the past five years.  With both AMP, one of Australia’s largest life company’s, and Asteron following its acquisition by TAL, now closed to new business there are now fewer life companies competing for new business than at any time in the past,” it said. 

“Ongoing restructuring of large institutionally owned dealer groups has exacerbated dislocation in the advice channel, and with alternative direct channels now closed or suspended by most major companies there is little prospect of a short-term turn around in risk product sales.”

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Perhaps the Life Insurance companies should have stood up to ASIC, the Govt, Trowbridge and the FSC during the LIF negotiations and supported the experienced, professional and loyal Risk Insurance advisers when it really mattered.
A consequence of the lack of a very determined opposition by the Life Insurers to the then proposed structure of LIF is now an ever increasing depletion of experienced advisers who no longer can effectively justify spending the time and expense on placing new business at a significantly reduced commission basis.
Soon to transition to an unworkable 60% upfront model from 1st Jan, 2020, the state of the Life Insurance market from the IFA space will become significantly worse.
When the ASIC 413 Report was released, the Life Insurance companies should have immediately consolidated and put forward strategies to restrict commission payments or eliminate any advisers who were repetitively replacing business. It required a determined and coordinated approach and the advisers who were acting professionally should have been protected from what is now an unworkable outcome with still some corners calling for the abolition of commissions entirely....a move that would all but destroy the industry and leave millions of people without adequate insurance cover and significantly less advisers to assist with advice, strategy and claims management.
In order for this industry to return to a model of sustainability, the commission structure should return to the previous Hybrid model of 80/20.
To offset any concern in relation to policy replacement, the commission paid on any replacement within 2 or 3 years of the policy commencement date should be limited to a Level commission only basis.
This would eliminate the possibility of adviser's receiving Upfront remuneration at all within that period.
The answer at the time was relatively simple, but ASIC was on a mission with an agenda and the Govt was completely un-supportive of really listening to those who knew.
Kelly O'Dwyer's repetitive commentary at the time was that these changes would " enhance consumer outcomes".
Nothing could be further from the truth when the average consumer will not be able to access quality Life Insurance advice at an affordable cost base.
They will then proceed with either the wrong type and level of cover unsupported by a dedicated and experienced adviser or simply go without and expose themselves, their family or businesses to financial risk.

of the calls to be reasonable and fair

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