Are life insurance advisers at risk of extinction?
Commission changes, premium increases, and profitability fears have driven risk advisers out of the profession or into new advice careers, says Adviser Ratings.
During 2020–22, risk advisers were between 2.4 and 2.5 times more likely to leave the industry than their holistic adviser colleagues.
Research compiled for the 2023 ARdata Life Insurance Study recorded 150 ‘pure risk’ advisers in Australia. The group represented less than 1 per cent of the 15,819 retail advisers across the country.
Adviser Ratings also found that 3,400 advisers wrote at least some form of risk volume, which included 1,200 advisers who carried large risk books.
Nearly 80 per cent of the adviser profession either wrote little to no risk or referred to the dwindling risk specialists.
Australian Prudential Regulation Authority (APRA) data demonstrated that retail advisers wrote more than half of Australia’s life insurance, despite the decreasing number of risk advisers.
“Given this, advisers have repeatedly expressed concerns the falling risk universe will result in a significant underinsurance problem in Australia,” Adviser Ratings stated.
ARdata’s study highlighted that regulation complexity and underwriting standards were two ongoing challenges for those in the risk space.
Some advisers’ clients became outpriced by premium increases and had to cancel their policies, while others were ‘orphaned’ due to the sharp rise of risk advisers exiting altogether.
The industry was awaiting Assistant Treasurer Stephen Jones’ response to the Quality of Advice Review recommendations, who recently promised a government response “very soon”.
Reviewer Michelle Levy proposed retaining the existing exemption for benefits given to life risk insurance products but requiring financial advisers (relevant providers) who provided personal advice to retail clients in relation to life risk insurance products to obtain their client’s informed consent, in writing, to receive a commission in connection with the issue of a life risk insurance product.
Adviser Ratings believed insurers could play a key role in promoting risk advice as a career for new entrants and could further support those in the life/risk profession.
AUTHOR
Jasmine Siljic
Recommended for you
While returns and fees are the top priority for older Australians when it comes to their superannuation, more than one in 10 are calling for access to tailored financial advice.
Determinations by the FSCP since the start of 2025 are almost double the number in the same period of 2024, with non-concessional contribution cap errors and incorrect advice among the issues.
Whether received via human or digital means, financial advice is reportedly leading to lower stress and more confidence, according to Vanguard.
The new financial year has got off to a strong start in adviser gains, helped by new entrants, after heavy losses sustained in June.
Risk Advisers exited the profession in droves because they copped a LIF invoked 40% pay cut which rendered business commercially unviable for most, and only marginally viable for those who chose to remain. Those who still write risk usually only do so for clients with higher annual premiums (i.e. forget the 20 - 35 year old age bracket) or when cross subsidised against other income generating services (i.e. accounting / mortgages / complex advice). If it's not commercially viable, Advisers won't offer the service. Economics 101.
Consumers and Government will not fully realise what they have lost until it is completely gone. Neither will the widowers, widows and the orphaned children.
Changes to remuneration didn't cause me to give up advice it was the compliance risk. I would argue anyone providing Risk Advice is doing it illegally and certainly not in the best interest of clients (under the corps act definition). I would say it's impossible to meet 2023 compliance standards. I'm not even talking about 2013 standards. Remember advice that's in the best interest of clients is significantly different to compliant advice that meets the best interest regulations and would pass ASIC standards.
It’s all a cluster F