Online life/risk sales increasing exponentially

New data from Roy Morgan has confirmed what many life/risk advisers have been worrying about – an exponential increase in the number of life insurance policies being purchased online.

The Roy Morgan data revealed that as at November 2017, 349,000 current life insurance policies were purchased online, representing a 108 per cent increase over the last five years.

The research analysis said this growth rate represented the highest for all channels used to obtain life insurance.

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The Roy Morgan research found that telephone remained the main purchasing channel for life insurance but this was being quickly overtaken by online and employer-related activity.

It said nearly a quarter (24.7 per cent) of life insurance policies had been obtained by telephoning insurance companies directly, closely followed by using an employer with 23.9 per cent.

It said the most rapid growth had been in purchasing from insurance companies online which had grown from 4.6 per cent in 2012 (168,000 policies) to 10.8 per cent in 2017 (349,000), representing a growth of 108 per cent over the period.

The survey analysis said insurance brokers appeared to be the biggest losers over this period, declining from 15.9 per cent in 2012 to 10.8 per cent in 2017, representing a loss of 35 per cent or 202,000 policies.

It said financial planners accounted for 7.3 per cent of current policies, up marginally from 7.0 per cent five years ago, with policy numbers showing no real change.

The sale of direct life insurance is currently being scrutinised by the Australian Securities and Investments Commission (ASIC), while planner organisations have warned about the implications of directly sold insurance policies with underwriting at the time of claim.

Commenting on the survey result, Roy Morgan industry communications director, Norman Morris said it appeared that how life insurance was obtained was facing a major transformation, moving away from traditional insurance broker or life insurance salesmen toward online purchasing.

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There's enough television advertising for people to think they are buying the right product based upon price alone. Most of those products bought offer inferior benefits and do not deal with clients circumstances as is required by the advice industry.
For instances, someone who has a $500,000 mortgage, 2 young children and a dependent wife who may or may not work part time will approach a life insurer direct and and get a quote for $500,000 of cover. What is lost in all of this is that the adviser is required to know their client and know their product.
The reality is that, that client should probably have from $1m - $1.5M of cover to adequately protect his family and their assets along with other potential covers available. Not all life companies have a good reputation for paying claims and not all life products on offer are quite the same.
The unsuspecting client will not find out where they stand until there's a claim.
The advice industry has never been more under scrutiny.
If you ever needed any further proof of why we have the LIF legislation, that was so heavily promoted by the FSC, then think about why the direct insurance activity has increased.
It was always the intention of the FSC to get rid of the adviser advice model and go direct, with most offering inferior products to an unsuspecting public.
Caveat Emptor !!!

This is exactly why the FSC conned the government over the LIF. More junk insurance and less claims to be paid by wiping out risk advisers.
Risk advisers do a better job but reduced commission and needing to charge a fee for risk advice means driving more customers to direct junk insurance.
On top of this the industry bodies and government are scratching their heads wondering why 75% of advisers intend to leave the industry ahead of the qualification requirements.

Given the amount of money spent by ASIC monitoring the 10% of polices sold by advisers, they must have a huge budget to monitor the other 90%, or perhaps ASIC is just assuming all is good until the ABC does a "in depth review" for them.

Oh Dear! Watch the Tsunami of litigation lawyers salivating at the thought of representing these people in a few years as claims are denied.

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