Direct Insurance Taking Business From Advised Risk Market

5

Research firm, Plan For Life (PFL), has raised eyebrows during the last week with the release of a report in which its says the direct insurance market is having an impact on the ‘advised’ life insurance sector.

PFL’s Direct Insurance Report 2013 – Identifying Real Differentiation, reports evidence that direct insurance products are becoming increasingly similar to advised products and beginning to compete for market share.  The research firm highlights two key areas in which direct insurance propositions are making ground: rewarding customer loyalty and new approaches to risk mitigation.

PFL says direct insurers are attracting new customers and retaining existing customers by offering a variety of rewards and incentives, including:

  • Free cover
  • Discounts offered for existing memberships/joint applications
  • Loyalty discounts
  • Provision of an EFTPOS card
  • Complimentary frequent flyer membership and earning frequent flyer points

In terms of new risk mitigation options, PFL uses the example of where a direct insurer will offer accidental death only cover where a client’s medical history may prevent them from achieving an outcome under ‘normal’ or retail underwriting conditions.

One experienced adviser has told riskinfo his experience has been that, until now, the direct market does not offer a cheaper premium when compared to the retail market. However, PFL advises its research spanned a range of variables including age, gender, smoking status, product type and sum insured, and has established that some direct insurance premiums are lower priced when compared with retail products offering similar benefits, while the gap between direct and retail products in their general terms and conditions is reducing.

The underlying elements of the direct insurance market that have been investigated by PFL in creating its research, include consideration of:

  1. Product pricing
  2. Policy terms and conditions
  3. Market share of key players
  4. Lapse experiences
  5. Actuarial forecast of market growth

riskinfo will report additional findings from this ground-breaking report over the coming weeks as PFL releases further details.



RELATED ARTICLESMORE FROM AUTHOR

5 COMMENTS

  1. As advisers we cant compete with these firms as their marketing power is massive. We could choose to stop writing business with those who promote direct, i feel we could win the battle but ultimately lose the war. we need to compete on aspects other than price. Our client value proposition needs to clearly stand out that while we advise on and arrange appropriate cover, our assistance and advice doesn’t end there.

  2. Gee, I wish I had the smarts to think the way that Direct Insurance do. Now how does it go again; if a person has health issues that prevent them from obtaining standard cover then Direct Insurance will offer Accident Only Cover. Wow, Brilliant……I’m running out of superlatives. No wonder guys like me with 30 years experience can’t compete with Direct when they come up with out of left field solutions like that. It’s like Einstein versus a Chimpanzee.

  3. If there is no adviser direct insurers can get away with grossly inferior product a major vendor offers Income protection but not as we know it.;
    NO partial benefit
    No cover for mental health
    NO cover beyond 5 years
    They also encourage those with suspect health they have guaranteed cover sadly without an adviser clients will fail to read the small print that any claim may be denied due to a preexisting medical condition.

    The insurer who backs this product provides good cover and real IP through the adviser market where they know they would never get any traction with an inferior if cheap offering.

    This sort of product is most damaging in the long term when the reputation of the whole industry will suffer with TV promoted horror stories of benefits denied and
    “Insurance companies don’t pay out”.

    All of the shortcomings of these products are in the PDS but do you read the licence agreement on the software you just downloaded. Your average consumer will not read a PDS either he trusts the industry would not allow him to be so blatantly misled.

    Who is alerting the public “get advice before you buy insurance” the main concern of the regulator seems to be ” make sure your advisers remuneration is not conflicted”.

  4. When will people understand the difference between advice and information? Call up one of these direct insurers and listen to the recorded messages you have to agree to ! What a joke ! I thought the whole purpose of the FOFA and the paperwork of other requirements that have come before it was to protect the customer and enhance their understanding of what they are purchasing and why how it will benefit them meet their needs and objectives etc etc It appears as long as the premium is cheaper we will have That One. How about some serious regulation on these information only providers?

  5. I find it hilarious that we are having this discussion. Just look at the research further down on the email and you’ll find that client value everything that an adviser offers…knowledge, listening empathetic ear, relationship trust. All the things that direct couldn’t possibly deliver.
    Besides, how is direct insurance satisfying the best interest test?

Comments are closed.