The life insurance industry needs to acknowledge the downturn in financial adviser numbers and better support those who remain as they are a key conduit between client and insurer.
Speaking at the Australian Institute of Superannuation Trustees super insurance symposium, Maria Falas, head of strategy and transformation at ClearView Wealth, said insurers relied on the relationship between advisers and their clients.
“It would be remiss of me not to acknowledge the instability of the financial advice industry. We are seeing the numbers of financial advisers at a five-year low as 9,000 exit the industry and we are seeing advisers’ future business models remain uncertain and the pressure of retraining under FASEA [Financial Adviser Standards and Ethics Authority] is adding to that.
“For retail insurance, our business model relies on the adviser-client relationship. Life insurance is purchased through advisers who guide the customers through their options prior to making the recommendation. And we’ve got COVID that’s also impacted financial advice businesses and how advisers and clients interact with each other and what they expect from their preferred insurer.
“The retail industry can control the products we develop, the service we provide and the ease with which we can do business. We can also better support financial advisers through challenging times.”
She said the launch of new individual disability income (IDI) insurance, which came into force on 1 October, had simultaneously prompted a “massive influx” of applications into the old-style products and insurers would need to balance the needs of both.
“Across the life insurance industry, the traditional life products are closed to new business and leading up to this period of closure on 30 September, a lot of insurers had a massive influx of applications and some of those are still in the process of being underwritten and onboarded,” she said.
“As the dust settles, we need to strike the right balance between ensuring the new IDI products remain fit for purpose but also ensuring we have sustainability and affordability for legacy products. We need to make it easier for advisers.”
Comments
For a start how about manning insurer call centres properly?
Wait times are ridiculous and insurers are driving cost and inefficiency into advice practices.
Start with the little and simple things first if you don't mind.
The first few weeks post income protection legislation and new products have been pretty bad. Products all over the place, different amounts covered, sneaky offsets, no indexation, lack of super coverage. No too mention that super account policies are retaining the own occupation and 75% coverage. Crazy times in the risk insurance world.
If insurers concentrated on the core business, insuring people, and stopped the rest of the crap such as well being programmes, heavy discounting for new business, shafting existing clients one one hand to give out non underwritten insurance on the other, maybe we could repair the relationship. However our concerns fall on deaf ears, we have been screaming about things that would have helped the industry, no more non underwritten default insurance, or at least seperate smokers and non smokers in that pool. Don't discount new business, price new business sustainably. But no, they still chase the super fund business, they still discount new business. They now have to sell inferior products as they cant control their own risk and need to be told how to do so. I want to insure my clients, however how can you in this market, there is no certianty whatsoever.
As a matter of interest, why do you think there was a sudden influx of business into old style but inferior IP contracts before 1 October 2021 ?
The answer is simple, the new products aren't worth the paper they are written on and any credible adviser will find it almost impossible to convince a client to buy one of these new inferior IP contracts that will not guarantee that a claimant will receive much in the way benefits in their hour of need within the first 2 years and certainly questionable, beyond that.
Yes all true, but wait for the next phase. What they will do is ramp the premiums on the "old" book to either get the client to "upgrade" to the new (worse) policies or cancel altogether.
The sad fact is, like all the other regulatory change destroying the advice business, the regulators continue to ignore the practitioners and people who actually understand how this all works and listen to academics, lawyers and other muppets who have no idea of the reality of their flawed theories.
Worse still, they have no idea about advice accessibility is being destroyed for ordinary Australians. They, and the country, will be way poorer because of the short sighted and ignorant approach by the regulators. The FSC and the insurance companies have made the bed that they will now have to sleep in. Frankly they deserve it. Advisers and the new unadvised Australians do not.
Yep, spot on Wildcat. I have no doubt the premium increases will continue at an alarming rate on the policies that actually pay claims, making them unaffordable (more so). The insurance companies have played everyone really well, including APRA.
I cant provide Income Protection advice anymore. I can't stand behind a recommendation of the new policies. I had confidence the old ones would pay out, irrelevant of premium increases. These ones are just leading to client complaints in a few years that will somehow be the adviser's fault as usual, despite APRA's mandate.
I'm with you SD. Recommending any new income protection product is just too risky now. It's a complaint time bomb. When you combine that risk with reduced commissions, extended clawbacks, and excessive regulatory overhead, it's simply not worthwhile providing insurance advice to new clients anymore. Even for the small minority willing to pay a fee. I no longer offer it.
I honestly do not understand why you say the new IP products will not pay out? I get that the new product has lower amounts that can be insured, and removed lots of add-ons (ironically, consistent with the suggestion of an earlier reply to get back to basics). Under the new policies, if a policyholder is unable to work due to injury or illness, they will get paid a benefit.
They also scale back payments after a period, depending on the provider. Even if you don't get into "compliance" trbl as you've done nothing wrong the injured or ill client will say why did you sell me this SH1T policy, complain to AFCA and they will make you pay them first and then their only resolution is ALWAYS to pay the client irrespective of the culpability.
I was speaking to someone just this week. AFCA said we see you've done nothing wrong but we want you to pay them anyway so we can close the file. NO KIDDING!! Guilty till proven innocent kangaroo court.
The risk insurance adviser market is declining, partly due to the "Olde Guard" or "The Olde Riskies" retiring (thus leaving the industry with a vast knowledge base void), but more so due to the lack of commercial viability at 60/20 commission levels as was deemed "appropriate" by those "experts" and institutions who are not advisers. Simple Economics 101 textbooks teach all that when a commercial enterprise becomes unviable, participants leave. If the next ASIC review recommends abolition of commissions altogether, then insurance advice will immediately cease as it is not a financial service clients are willing to pay for at a level that is even remotely commercially viable for advisers to deliver. As Jack Reacher (Tom Cruise) once said in that classic movie fight scene......."remember.....you wanted this".
I thought Insurance Advice died. . Way too much compliance and PI Cover in Australia is down to about two firms so if you get a poor audit report cause you didn't discuss G'teed Renewable you''re stuffed. Most riskies left with FASEA, the existing advisers that dabbled left due to compliance, and won't re-enter due to compliance, and could you imagine a Business or Commerce Graduate coming out of Uni then having to do further Units to meet FASEA . So they've finally done the equivalent of a Masters Degree..... and then at the end of the day they tell there mates and girl/boyfriend they sell insurance. So if it's not dead it's like a 90 year old in a Nursing Home in Covid infested Sydney. Insurance companies wanted this and they're trying to do the same thing now with advice generally.
Reply to "Rob" above:
Yes Rob, good quote from Jack Reacher. It resonated with me as I'm leaving risk advice (and the industry) THIS MONTH after 35 years. Your quote was prescient as I recall the life companies NOT giving advisers the moral OR practical support around the new 2 year clawback and the dropping of commissions. Where the HELL were they in championing our cause with all that!
Of course, we all know, they were in the corner just watching and offering insipid platitudes and rubbing their hands together gleefully thinking how wonderful it would be to pay advisers less of THEIR profit AND be able to grab it back easier for longer(!) if a client lost their job and couldn't afford a premium.
Well, when all (90%++) their advisers have left this once-great industry I hope they remember the Jack Reacher saying: "Remember, you wanted this" - yep, karma is a real b*tch and the life companies will abruptly discover this come about 2025 or even sooner. Will they even survive? Doubtful . . . robo-advice has zero possibility of saving them.
Not sure why you think this will kill the insurers? My view is that customers will be just redirected to more sustainable products such as life cover combined with TPD and short term IP (noting the inherent issues with TPD as well).
'Sustainable products'. What an evil, misleading phrase that is!! In reality, we are talking about shit products, with nasty exclusions. Like one major insurer who now excludes sickness or injury if at the time, you are taking medication not prescribed by a doctor. God help you if you take an over the counter medication for hay fever, eczema or a headache. Or another major insurer (there aren't many left by the way) who now excludes a payout if you do something illegal, like maybe accidentally run a red light, or jay walk, or forget to scan your QR code..... Or all of the new IP products which won't pay a cent if you are out of work or studying in the 12 months prior to a claim. Don't rely on the research reports, check the new exclusions in the PDS. You will be shocked! Financial planners should think very carefully before selling any life insurance product. The game has changed. Better to cease all new life insurance advice and stick to helping boomers retire. It is much safer, they can afford the fee, and there is a shortage of financial advisers. Life insurance companies can go to hell as far as I'm concerned. They made their bed, now they can lie (pun intended) in it
Disability insurance is in a death spiral caused by the perfect storm of bad management and bad regulation.
These new IP contracts are going to create some issues. Due to their poor quality its going to create a large influx of AFCA complaints against insurers and probably Advisers, Increases in PI insurance, and most of all create a negative perception of insurance its self. People will not trust insurance companies and will not insure themselves.
No one mentioned possibly putting comms back up to make it worth our while.
I wish you well with that. Can't see that changing anytime soon.
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