Synchron Calls for Insurance Product Innovation

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The objectives of the Trowbridge report could be achieved through improved product design and smarter underwriting, according to Synchron, which is urging insurers to step up to the plate.

Synchron Independent Chair, Michael Harrison
Synchron Independent Chair, Michael Harrison

The risk-focused licensee said it believes John Trowbridge’s report on the life insurance advice industry chose to focus too heavily on adviser remuneration and did not put enough pressure on insurers to make changes to products and systems.

The comments follow an overseas fact-finding mission undertaken by Synchron Director, Don Trapnell, and Synchron Independent Chair, Michael Harrison. Mr Trapnell and Mr Harrison met with a range of stakeholders from the UK’s advice and insurance sectors, seeking information on the recent changes to the UK’s financial advice regulation regime and how these have impacted products, advice quality and business models.

Synchron said the results of its fact-finding exercise have led to the determination that the issues of mis-selling and ‘churn’ could be more effectively addressed through improved product design and product implementation solutions, rather than through remuneration measures.

…we now intend to seek partners that are prepared to offer life insurance products that meet our specifications

Synchron’s report noted that ‘… in both the UK and South Africa the [insurance] companies acted to eliminate churn (which in turn eliminates the alleged nexus between high upfront commission and bad advice) by introducing longer responsibility periods, whereas in Australia the companies have declined to act and are seeking Government intervention or regulation, and blaming all the issues on the advice channel.’

The licensee is attempting to drive the Australian industry forward by approaching insurers with a list of desired product and technology solutions.

‘We believe the Trowbridge objectives can be met by improved product design and smarter underwriting and we now intend to seek partners that are prepared to offer life insurance products that meet our specifications, in the same way that general insurance cluster groups are successfully seeking underwriters to support their product design,’ Synchron said in its report.

Among the product developments being proposed by Synchron are:

  • An electronic underwriting system that incorporates a simple point of sale assistant to assist with the process
  • Level premium fixed term products, with a hybrid commission model
  • An ‘advance payment’ option allowing advisers to draw on future commission earnings to enable them to recover the full cost of writing new business
  • Flexible products which allow advisers to shape premiums to more accurately serve the needs of consumers

Speaking to riskinfo after returning to Australia, Mr Harrison said he was confident the ‘bottom up’ approach could yield results within a relatively short timeframe.

“I’m hoping that we will have some things ready to go to market by July 1,” Mr Harrison said. “It may just be some small product innovations to start with, but most life companies already have the systems to do what we want to do. It’s not that radical, it’s just there’s been no pressure or demand from advisers or licensees.”



4 COMMENTS

  1. Well, one licensee is not just voicing its view on this mess, it’s taken steps to see if a do-able solution can be found. Don Trapnell and Michael Harrison have taken the lead here. They’re to be commended for this.
    Why is it that many other licensees are conspicuous by their absence in this most serous of matters in our industry?

  2. I have felt like a lone voice in the wilderness for many years now. My efforts to get life offices to see the rewarding of high producing [upfront commission] writers was promulgating the so called “churn” issue, whilst they mostly ignored smaller writers with a good retention rate [and in some cases with a $million of in force premiums built up over many years].

    The release of the FSC submission simply reinforced my long held belief life offices were basically prepared to throw the baby out with the bath water. Use us as sacrificial lambs to avoid their admission of long standing guilt as the main perpetrators of the industries reported ills.

    It was clear from the start that the vertically integrated business model was flawed in ethics and best interest duties.

    An article in the H-S today this very day points the finger at the big banks, not the struggling true “independents”.

    The big banks [and maybe the likes of AMP] have been the hatching ground of most of the industry issues and complaints.

    Risk insurance advising has been thrown in the same wash as financial planning advice. Tarred with the same brush, mostly innocent, yet still guilty by [ill-informed] association.

    I hope Synchron succeeds in getting the life offices to stop shifting the blame onto us and for once do something constructive for the genuine, long term and professional members of the advice industry.

  3. I don’t agree with longer terms of responsibility. I am not responsible for what happens to a client financially over 2-5 years.
    I do agree we should have a form of standard product particularly TRAUMA instead of the lottery we have now . Which do you plan to get Parkinsons or MS.?
    a BASIC POLICY OF ABOT 20-25 RISKS, ALL THE SAME AT EVERY COMPANY. then a special or plus or what ever you want to call it but it would have extra risks, again all the same.
    Same definition etc and the same with income protection then there is NOTHING TO CHURN.
    THERE COULD STILL BE LEVEL PREMIUMS . With the more defined risks they may even be lower and the break-even point may get back to around 10 years they always claimed it was

    When there’s crooks there is allways crooks.
    I had an $18000.00P/M INCOME REPLACEMENT
    nabbed by a bank who it seems threw in some cheap private money to a group of employees of a company along side a large develop ment loan. I don’t know what the replacement was but only a bank could do that! That policy could not be beaten. Never mind the secret commission.

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