Direct insurance promises growth

Direct sales has the potential to be one of the most profitable areas for life insurers over coming years, according to new research released by Rice Warner Actuaries.

The research, released this week, said the potential growth afforded by direct sales largely resulted from the saturated nature of group life insurance sales within the superannuation arena.

The Rice Warner analysis said most life insurance in Australia was sold either through superannuation funds, primarily as default cover provided to all members, or through the retail market via licensed financial planners.

“However, competition in both these markets has become increasingly intense and the costs of distribution can inhibit profitable growth,” the analysis said.

It said insurers had therefore looked increasingly to direct sales as a means of diversifying distribution.

“Whilst marketing and distributions costs are high, direct products do not need to compete as aggressively in terms of price and features and the Financial Services Reform advice requirements are far less onerous,” Rice Warner said.

It said technology had also assisted in terms of data mining, web-based calculators and automated assessment of individual risk factors.

Rice Warner said given these trends, and the significant potential afforded by underinsurance, it believed direct products and direct distribution would be a key growth area for companies in the next few years.