The life insurance framework (LIF) and changes to the remuneration structures will not increase the profitability of life insurers from sales, according to BT Financial Group.
National life insurance product manager, Scott Moffitt, told a panel discussion on the second day of the Association of Financial Advisers (AFA) 2016 National Adviser Conference that there would be no additional dollar profits generated from sales post the change, and it in fact might slide slightly into negative territory.
Moffitt’s comments were in answer to a question by AFA chief executive, Brad Fox, who posed that opinion around the LIF was that it would result in insurers making substantial profit, and then asked Moffitt would they would do with the extra profit.
“Life insurance accounting is supposed to be complicated but in effect you spread these costs of the remuneration over the life of the policy and for those insurers like ourselves we have a very good lapse rate in our business,” Moffitt said.
Moffitt said the reforms would improve the capital position of a life insurer as they would not have to provide as much capital because upfront commission would represent as a form of capital, which would boost the return of capital.
It would be difficult to generalise as every life insurer was different and it would depend on the impact it would have on lapse rates and other factors, he said.
Moffitt also said the focus on small enhancements to products had deceased compared to the past over the last few years.
When questioned by Fox on how insurers would enhance technology for advisers, Moffitt said insurers were gradually steering conversations towards improving tools of efficiency.
“Everyone bought into the market tele underwriting years ago and electronic underwriting. That was a step but those things need to be continually be enhanced and focused on how do we actually get better information out to consumers,” Moffitt said.
