TAL points to emerging trend in direct life

Major life insurer, TAL has told a Parliamentary Committee that customer satisfaction with direct insurance models is some of the highest in the industry and that consumers are becoming increasingly self-directed.

In a submission to the Parliamentary Joint Committee reviewing the Life Insurance Industry, TAL has reinforced its support for the provision of financial advice around life insurance but, at the same time, said it was important to note that "the direct insurance landscape is shifting and there is an emergence of distinct ‘new direct' models, driven by changing consumer behaviour and increasing levels of consumer self-direction".

"In the long-term the industry must be able to provide solutions for this type of customer," the submission said.

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It said that, traditionally, the direct channel of life insurance had catered for customers who were not being served by financial advisers and, typically, these customers had more simple insurance needs which are met by simple products such as funeral insurance.

"The most important focus in the traditional direct market is on ensuring that customers understand the cover they have purchased to avoid difficulties at claims time," the submission said. "We are focusing a lot of attention on ensuring that important terms, conditions and exclusions are clearly explained and communicated before a purchase is made and our staff incentive arrangements reflect this."

"Distinct from what we have described as ‘traditional direct', it is important to note that there is also a ‘new direct' model emerging, driven by changing consumer behaviour," it said. "We are seeing a new breed of self-directed insurance buyer who wants to research their options and make a purchase on their own terms and in a way that meets their need for control."

"In the long-term, the life insurance industry must be able to provide solutions for this type of more sophisticated, mass affluent consumer and this has been a key focus for TAL."

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A direct insurer isn't going to admit the faults in direct insurance is it....

Let the dinosaurs commence...
This will be the "fault" of the insurers.
The "fault" of ASIC.
The fault of everyone else.
There will be no acknowledgement that loading a premium by 25% - 30% to pay the dinosaurs each year for "service" which is basically, trying to sell them more insurance or, being there to obtain and help fill in forms in the (statistically) unlikely event that one of their customers might make a claim..

Bloated Trev, yes statistically unlikely but devastating and traumatic in every sense when it does occur. And for those clients who aren't adept at handling the claim (remembering it is just as statistically likely to be the spouse who wasn't the one researching and understanding the policies), or for whatever reason the insurer is not playing nicely, then the reign of the dinosaurs is not only significant, but often life changing. Put a value on that, in your smug oh--so-certain attitude (betting you are a reasonably new adviser <10 years, so haven't seen much in your limited experience, or else simply an employee).

Big Trev, actually TAL claim their direct insurance is actually 30% more expensive than the cover purchased via an adviser.

Hey Trev, even including the loading for our commissions the retail products are far cheaper than the direct one's. Direct insurer's are praying on the lazy and uneducated who think they're getting a good deal and all they're really getting is non-underwritten, expensive garbage from an insurer who will do everything the can to not pay the claim and with no Adviser to help, they're stuffed. I'm assuming you have a direct policy? and you love telling your mates how they didn't even ask any questions right?? You might think it's statistically unlikely, well I've had 29 income protection claims in my business out of only 162 policy holders. It happens more often than you think.

Hey Big Trev, you obviously don't know anything about this. Will you be there to pay up on rejected claims by the likes of these direct insurers? And why do they have such a high lapse rate Big Trev??

fifteen - 20 years ago TAL - ex Tower, was a pioneer in direct marketing to adviser's clients with junk accidental death cover policies. Direct can be a licence to print money with sub standard policies.

There's a whole new generation of younger people who will go direct rather than see a personal adviser. Why?...because they can. It's time the industry re-introduced the one page CAR so advisers can quickly and efficiently get NEW cover in place for younger clients. If methods stay the way they are, I can see risk advice drifting away and the revenue with it.

I'm all for the direct insurance caper, with one proviso - that there is a government minimum "MyLife" insurance model established from which the public can make valid comparisons of cover and cost. Without such a benchmark it is likely that consumers will not be better off.

Here's just one example...

Last week I received a direct insurance offer. As an adviser I was interested and sought a quote. The premium for the cover selected ($500k death, $200k TPD, $100k trauma) was $415.71 per month.

Standard comparison software suggested market premiums at full adviser commission ranged from $240.78 to $348.93 per month. So the cover was 16% more expensive than the highest cost commission-based adviser premium I could find.

The PDS confirmed the cover is underwritten at entry but i did go further than my initial investigations.

The point of this - don't assume that premiums will be lower simply because the offer is marketed direct. In fact, anyone who is suggesting such an idea is failing to understand the dynamics of cost, scale and branding that contribute to a sustainable insurance marketing model.

Too many commentators, advisers and managers have forgotten or chosen to ignore longer run economic market cycles. Remember that Australia has not suffered a recession in over 25 years. This is a rare set of circumstances, and business models arranged on the assumption of a continuation of continued economic growth will look great right up until the economy tanks, unemployment rises and costs become more important than income.

Direct insurance could be a fantastic consumer service IF consumers can be provided with the appropriate tools. Online Health Insurance comparison websites were a great example of this - when they first started the sites offered a limited range of companies and NO declarations of scoping for the universe of available products. Direct can be great for the knowledgeable consumer but with insurance there are so many loopholes and options that consumer protections need to be boosted significantly before the "knowledgeable consumer" can actually possess valid and useful knowledge.

Hey Michael, I once spent part of the Xmas break comparing definitions of online trauma policies, focusing on heart attack and cancer. Chalk and Cheese when compared to retail. Many advisers are not capable of conducting an in depth analysis, so what hope does Joe Public have?

You only need to look at the FOS claims for direct policies V's Advised policies.... The worst of the lot is General Insurance policies - eg. Sickness & accident.

why do you call sickness and accident, General Insurance?

My understanding is there are 2 different insurance laws. One covering life insurance and one covering general insurance, however general insurance can include life cover. Just with much lower consumer protections.

Phil, the sickness and accident policies under general insurance are similar to income protection. However, they require new disclosures are each renewal of medical conditions, generally have less favourable terms and have significantly different prices (higher or lower) depending on the occupation.

ok thanks

Well now, TAL would say that, wouldn't they?

I take it this consumer behavior isnt being driven by endless funeral and life insurance ads on TV all day every day? Its astonishing how much advertising they do. Then when clients get knocked back or dont understand definitions its well the clients didnt want advice they just wanted the products ! Its just more spin and crap from tal as per usual. another way to push inferior coverage onto unsuspecting clients that may already have cover in super for one. I wonder if they ask Mr Jones you may already have cover with your super fund please check before taking out this life insurance, of course not why would they, better not to say anything offer no advice and push it all back onto the clients if any issues arise.

I also refer you to TAL's previous recent response by a "Margaret" Somebody who was answering questions about Group Insurance to a Parliamentary inquiry , and [very wordily] stated that [I paraphrase] commissions and "Profit Sharing" paid to Super Trustees is a "...balancing mechanism..." paid back to "...help reduce costs to Members...". Yeah, right... Mealy-mouthed BS and convoluted evasions which obscure the truth: There is "Conflicted Remuneration" ALL THE WAY UP THE FOOD CHAIN OF FINANCIAL SERVICES, and the only differentiation is what it is called, who gets it, how close to the trough they are [and whose kids go to which schools with which politician's kids...].

Advisers are the low hanging fruit, easily targeted, vilified, and abused. The recent dishonest, threatening, destructive, economically counterproductive, and IMO corrupt, legally unjust, and disgraceful conduct of Frydenberg and O'Dwyer regarding the LIF comprehensively demonstrates this.

BTW, TAL has been the "Sleazy Bottom Feeder" of the industry since it was Tower and bought Adriatic, Friend's Provident, and FAI Life in the early-mid 1990's. It has ALWAYS sought to maximise direct sales and drove clients insane with (then) antiquated, horrible systems and pathetic Client Service. I know-I personally have (advised) policies purchased from them from before I entered the industry in the early 1990's, and have had to deal them for decades.

Good points DJ. I can't believe super funds are allowed to sign up members to insurance policies they haven't agreed to, and then use those profits to reduce the fees for other members. How is this behaviour not considered anti-competitive? If TAL believe this behaviour is acceptable, there are obviously serious cultural issues in that organisation.

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