Direct insurance impacts advice market
Direct life insurance seems to be having an impact on the advice market, with new research showing direct products are significantly cheaper than those available through advice.
Plan For Life's Direct Insurance Report 2013 — Identifying Real Differentiation found direct products have become increasingly similar to advised products and are beginning to compete for market share.
Plan For Life compared premium rates and found direct insurance premiums for life cover were, on average, cheaper by approximately 25 per cent at entry age 30 and 60 per cent at entry age 45 against an advised product with sum insured of $250,000.
Another example is stand-alone trauma cover of $200,000 offered by direct insurers, which is on average cheaper by approximately 30 per cent at entry age 30.
"Direct insurers take a number of different approaches to risk mitigation," Plan for Life stated.
"For example, direct insurers select the best prospects by combining implicit underwriting, excluded ages and benefit types," the report said. "Another example of risk mitigation is by offering an alternative product."
However, major insurers told Money Management earlier this year they didn't regard direct insurance as a threat to the advice market, given the value advisers provide.
In November last year, the Australian Prudential Regulation Authority (APRA) had expressed concern around directly-marketed life insurance, claiming many concepts were unproven.
APRA, which found the direct marketing of life insurance has blossomed with the emergence of new distribution channels such as online, said its focus had been on the governance associated with this type of business.
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