The lift in education standards and professionalism in the financial advice community, along with the code of ethics, and the life insurance framework reforms has had downstream implications for the life insurance sector and its customers, according to MLC Insurance.
Speaking at the Financial Services Council’s life insurance summit on Monday, MLC Insurance chief life insurance officer, Sean McCormack, said over the last five years new business premiums had reduced by 60% which had had a significant impact on insurers who were managing the delicate balance of insurance books.
McCormack pointed to the 5,000 advisers who exited the industry and 38 joining last year, and the 950 who left the industry this year with just 12 who joined.
“We know we have challenges attracting talent in the life insurance industry and I think the advice profession is seeing the very early challenges of attracting talent through as well.
“Not withstanding that challenge from an expense perspective that we all need to work through, I’m deeply concerned with the toll this is taking on the advice community at the moment. There are heightened levels of stress and strained, and many advisers feel their sense of identity has been stripped away through the challenges from the last couple of years and that’s an important conversation for us to be having this week on mental health.
“Without having to sensationalise tragedies, there are various reports of advisers taking their own life because of the stress and strain of the challenges they are facing. This comes back to the availability of good life insurance advice.”
McCormack said there were two opportunities the industry had which were how to collectively reduce the cost of advice or the cost of fulfilment and making the process efficient on the advisers’ end.
“The cost of advice needs to reduce 20% to 25% for life/risk advisers to remain profitable,” he said.
“The life insurance framework review next year is an opportunity to make sure we talk about the consequences of further changes to the remuneration model in place for advisers.
“I’m concerned that if we reduce further or eliminate the commission model, it will further exasperate a further looming accessibility issue. For us as an industry it’s important that we ensure good life/risk advice is not just the domain of the very wealthy.”
McCormack noted that he hoped the higher professionalism of the industry would attract younger university students to pursue advice as a career.
He warned that it was important to get the balance right and not come at the detriment of advisers who had been looking after clients for years and years.