High lapse rates unaddressed in insurance
Non-aligned dealer Madison Financial Group has welcomed AMP's remuneration structure change but called on insurance companies to be more innovative in product design and to reduce premiums by 10 per cent.
Madison general manager, Giulio Russo, said competitive forces will compel most insurance companies to follow AMP's decision, which he regards as a positive move.
"However, we also challenge insurance companies to be more client centric and innovation in product design," Russo said.
There is little product innovation to persuade consumers to take up insurance and hold on to it once they have got the protection, he believes.
"This is a perfect opportunity for them to really help address high lapse rates. For example, why not reward clients who stay with insurers for three years or more via a rebate or reduced premiums?"
Russo said AMP's structure is what the dealer group wanted and hopes other product providers will implement a similar structure.
The dealer group has AMP in its approved product list of insurers and hopes its current arrangements will remain.
"In our submission to Trowbridge we advocated that high upfront commissions were a thing of the past but also suggested there still needed to be a range of remuneration structures for the advisers to choose from," he said.
"Product providers must offer remuneration structures that are sensible and commercially viable."
Recommended for you
Policy and advocacy specialist Benjamin Marshan has left the Council of Australian Life Insurers after less than a year, having joined in March from the Financial Planning Association of Australia.
The declining volume of risk advisers meant KPMG has found a rising lapse rate for insurance policies arranged by independent financial advisers, particularly in the TPD and death cover space.
The Life Insurance Code of Practice has transferred from the Financial Services Council to the Council of Australian Life Insurers.
The firm has announced it will no longer be writing new life insurance policies in the retail advised and corporate group insurance channels, citing a declining market and risk adviser numbers.
