Insurance Advice Pricing Models Revealed

Around half of those advisers who are subsidising insurance advice commissions with fees are not rebating or reducing the fee when they receive a commission, new research has found.

Elixir Founder, Sue Viskovic

Elixir Founder, Sue Viskovic

Elixir Consulting has released a new edition of its Adviser Pricing Models Research, with a focus on pricing insurance.The research reveals how 275 advice businesses around the country charge for their services.

“With the new insurance frameworks affecting how advisers are remunerated for their risk advice, there has been a significant increase in interest from advisers wanting to know how others charge for their insurance advice. The research is really helpful in getting a feel for what’s possible – for what prices and structures are working in this very complex area of advice,” said Managing Director Sue Viskovic.

We found quite a spread of those who received each of the three types of commission…

“We identified how participants charged for both insurance advice included in comprehensive, as well as for insurance-only advice. We found quite a spread of those who received each of the three types of commission (upfront, hybrid and level) as well as charging fees. Of those who subsidised commissions with fees, roughly half reduced or rebated the fee when they received commission, and half did not.”

The full report, as well as a summarised adviser insights version, was released earlier this year, and Elixir has now released an adviser Insights version – Insurance Edition. The research contains information on the pricing models used as well as the quantum of the minimum fees charged in businesses, plus how they charged for five different case studies.

The research can be accessed via the Elixir website.

  • ian hamilton

    well these half that took, fee for advice and commissions ( non rebated )
    have themselves to blame for our position. not very ethical I would say.

  • Jeremy Wright

    Sue Viskovic is charging for a report that gives information on challenges, emerging trends, insights, client case studies and research which will have relevant information for Financial Planners who work in the full gamut of Financial services, of which Life Insurance is one.

    However the research is flawed around Life Insurance and what clients are prepared to
    pay as a fee for service, as none of the 275 practices who participated in the survey from around Australia and the world, work exclusively in Life Insurance,so the argument about fees a client will pay for Life Insurance advice, implementation and administration is not relevant, as it is not based on correct analysis.

    Sue makes her living selling holistic advice and Financial Planning practices who work in Investments, Loans, retirement planning, estate planning, Business planning, may get some important tips that will help them.

    I however cannot sit back and let flawed research around my Business, which is
    Life Insurance advice, be thrown around as if it is gospel and let it be promoted as the truth, which based on a very limited and severely biased survey, does not represent in any way, how retail Life Insurance is sold, maintained and serviced.

    Sue, you have years of experience in your field and I respect that.

    Please have the courtesy, if you intend to consult in our industry to fully research
    and give accurate data based on relevant questions around Retail Life Insurance, not a fee model from 275 Total Financial Planning practices, which Life Advice is just one fee model that would be heavily subsidised from other areas.

    Every Life Risk Adviser in Australia is open to advice, so long as it is based on accurate and relevant data and to date I have not seen any from anyone.

    • Thanks for the opportunity to clear some things up Jeremy.

      This research was across 275 advice businesses, 12 of them identified themselves as working exclusively in personal risk insurance. When we sought participants, we publicly invited people to share their fee models, so I’m not surprised at the ratio of specialists vs non-specialists ( given risk specialists have on the whole, not been required to charge fees as such). As stated in previous comments, none of the risk specialists that we have researched have replaced commissions entirely with fees – but some 28 broader advice businesses have done just that – when delivering insurance advice as a standalone piece of advice. (Not subsidised, not packaged up.) That point is irrelevant anyway, as the whole purpose of this research is not to make sweeping statements of what the whole industry is doing, it’s about revealing what is working, in significant detail in a variety of businesses.

      The research is not flawed, or biased, it simply reveals advice models that are being implemented successfully in businesses right now. As stated in the report itself, no-one should attempt to copy another’s model without applying rigorous due diligence on their own business and client base. The bottom line is, if you keep believing that clients won’t pay for risk advice you will likely have a difficult time when the new insurance frameworks are implemented. I would hate to see a business close and experienced advisers leave the industry based on the factually incorrect assumption that clients won’t pay for risk advice, if they find that the new commission model won’t provide sustainable income for them.

      We have completed this research every few years because we know that many businesses find pricing their services difficult, and it is helpful to see how other businesses go about it. This last edition, we asked a lot more questions about risk advice, and identified how businesses are charging for it. If we researched specialist risk businesses only and uncovered how they price their services we would have an overwhelming majority who are taking either the upfront or hybrid model of commission and a smaller (but growing) percentage who charge a fee for their advice, and receive commission for implementing that advice. This doesn’t help those who are wanting to evolve their business with the changing legislation and client behaviours.

      What advisers want to know is of those who have started charging fees, how do they do it and how did they overcome the challenges that you so clearly have demonstrated that other specialist risk advisers are faced with.

      While we’re fact-checking, I don’t sell holistic advice businesses, my team and I consult and coach with advice businesses that provide ‘holistic’ financial advice, specialised risk advice and accounting firms.

      I have more than courtesy – I have my professional integrity to ensure that I do not provide advice in an industry or business I do not understand. Right now the business of insurance advice is evolving… just like every other business on the planet. Risk specialist advisers who are wanting to continue to service clients well and make a difference in their lives are also looking to evolve. The pricing element has been forced upon them – and so it is helpful and empowering to understand what other advice practices have done in this space.

      • Concerned Economist

        Sue, a lot of well-rounded corporate-speak will not help or change the fact that Aussies will not pay for solely risk advice. Please don’t tell me they will as you will belittle your standing in this debate even further. Advisers like myself and Jeremy, after 30 years of seeing it up close, will stand toe-to-toe with anyone who says otherwise as we’ve seen it on the ground and in the field. Office experts have simply not seen it in this dimension. Different complexion on fees however if HNW of course or if mixed in with Fin Planning but risk-only advice to ordinary Aussies will never garner a fee. Ever. Reduction of premiums is an industry-insider faux-fix. Clients will still want a discount and they will still think the premiums are too high. The companies will not keep premiums low just because commissions are reduced or gone.

        This is most definitely not turf protection on my part or inability to change. It is not a new view formed due to this latest commissions debate. It is a view consolidated over decades of experience and working closely with end users – the clients. If advisers are forced to leave, due to us not able to earn commissions for advice, then consumers will buy from the web. Not only life cover but, frighteningly, income protection and trauma cover. It will become a time bomb, one that will regularly explode – not just once! I’m sure I don’t need to expound on the disaster that will turn into for them at claim time. Client best interest? – what a sad terminal joke.

        So much for “best interest of the client” if the legislators, ‘experts’ and special interest groups succeed in deleting commissions (or reducing to a useless level with 3-year clawbacks!) and experienced risk advisers retire early or go do something else. There would be blood on their hands come claim time as their ‘efforts’ in ‘adjusting’ commissions would mean there were no risk advisers around to help them choose an appropriate policy OR get the best from it at claim time. Please don’t tell me you think the life companies can ‘help’ the clients navigate a claim after they’ve bought a robo-policy. Just don’t.

        The real answer is for the life companies to scoop up the bad advisers who twist business (they’ve stated they know who they are) and turf them out. Then we could get on with protecting Australians the way we should without this constant ‘special interest group’ interference all the time.

        God give me a world without politicians doing only what will get them elected the next time regardless of the ramifications to ordinary people!

        • WB

          Sue, I have to agree with Jeremy and Concerned Economist. I’ve been a “risk only” adviser for 17 years and have a long way to go before retirement – i.e. I’m still young enough to adapt to change, but this idea that regular Australians will pay both a fee to their risk only adviser AND a premium is nonsense.
          At the risk of laboring the point, we all know that a total reduction in commission reduces the premium by 30%. So even if the premium would normally be $3,000 pa, taking no commission reduces it to $2,100 pa. Now I raised this with another consultant in past editions of Riskinfo, Chris Unwin, who stated that it takes him roughly 10 hours to complete a risk case from start to finish and he would charge $300 per hour, meaning his fee to the client is $3,000. The question I asked of him is how a client can possibly be happy paying $5,100 ($2,100 premium plus adviser fee), when under a commission model, they are paying only $3,000?
          Sue, everyone appreciates that things are changing – but I have repeatedly asked those who keep pushing this idea that clients are “happy” to pay a fee to their risk only adviser AND an insurance premium to back up those claims with practical working examples in Riskinfo, but no one will!

          • Concerned Economist

            Thank you WB, for stating the point clearly and strongly without emotion – a discipline I often don’t possess! With our livelihoods threatened by those who care not, it is sometimes hard to respond to the all-knowing ‘experts’ without emotion coming to the fore.

          • I’m not sure whether to be insulted or flattered if you’re referring to me as an ‘all-knowing expert’?
            Anyone who has met or worked with me me knows that I certainly am not one who ‘cares not’ about advisers… and I also understand the emotion involved. My whole point of raising my head up is to help advisers like yourself to get through this and keep servicing clients while building a profitable and sustainable business.

          • Thanks WB. I’ll be presenting at the AFA Roadshow in the last week of August and first week in September…I strongly recommend you get along to that as I will be presenting some examples, as will PJ Byrne, he’ll share what he does in his business.

            It might also help to read my latest article, where I share my experience on what clients will pay for – http://magazine.riskinfo.com.au/21/what-will-clients-pay-for/#.VcQ4U5Oqomc

        • I wouldn’t dream of suggesting clients are best served only by insurers at claim time. On the contrary, I think that is one of THE most important times a client needs an adviser. Having assisted clients through claims , and a close friend just recently I know how vital your role is.
          And I hope you’re wrong… Because I don’t think that clients turning to online inferior products with no underwriting is a good outcome for anyone. I also know that you should not be expected to deliver your services at below cost, just as I know that with some lateral thinking, there will indeed be ways that you can keep servicing mums and dads.
          If that means we agree to disagree, so be it. Let’s both get back to more productive ways to use our headspace and time than arguing over a moot point.

          • Concerned Economist

            Hardly a moot point Sue, in fact it is very much the point going forward. See WB’s comment below then try and give us a valid response from your research. Please, go ahead . . .

          • Done. And when I say moot – I mean that neither you or I can change the new framework that is being implemented.

          • Concerned Economist

            How can you say such a thing Sue?! Nothing is in concrete or law yet, of course it can be changed. What else is the purpose of industry dialogue and forums such as we are using right now! Why would you say it can’t be changed? The new commission changes have not been fully ratified. It sounds like you’ve given up the fight on our behalf. Well, thank you very much.

            By the way, what do you mean by the first word of your last comment – “Done.”? Where is your response to WB’s comment? I cannot see where it has been ‘done’. I eagerly await your comment on that.

          • Sorry, ‘Concerned Economist’ – my reply to WB appears in my feed and he has replied to it, perhaps there was a delay in refreshing the page?
            My only fight is to ensure that great quality advice is continued to be delivered, and moreover, that more people seek quality advice, and take responsibility to ensure their families get protected.
            Change was inevitable, what is important is that we can keep growing a vibrant profession, and who knows? maybe with the changing business models we might be able to alter the public perception of advisers and get more people seeking their support. I refuse to believe that is not possible, but I do know that doing the same things expecting a different result won’t work.
            You are technically correct, I believe the proposed changes need to pass the senate… and hopefully there will be some adjustments to the 3 year clawback period, but the days of the upfront commission model are gone.

    • Concerned Economist

      Correct as usual Jeremy, on this issue. I am sick to absolute death of the self appointed, non experienced ‘experts’ who proclaim stuff like this and the life companies lap it up as Gospel. These ‘experts’ need to do a REAL study that would involve them sitting with REAL clients who just want help putting family life and income insurance in place for their loved ones. Sit these ‘experts’ in front of families while they speak with their insurance adviser, like me or Jeremy, while we conduct an
      appointment at 7:30pm at Blacktown, Gosford, Sutherland, Wollongong or Lapstone.

      Families in places like these that we insurance advisers travel to regularly to help Australian families protect themselves are far from the protected enclaves of power the ‘experts’ and company execs frequent. These so called ‘experts’ and execs would fall off their respective chairs during such an appointment as they would FINALLY come to the realization these ordinary Australian families will NOT pay a fee for basic insurance advice in ADDITION to the upfront premium required to start their cover. Premiums that increase never-endingly.

      Families in places like these that we insurance advisers travel to regularly to help Australian families protect themselves are far from the protected enclaves of power the ‘experts’ and company execs frequent. These so called ‘experts’ and execs would fall off their respective chairs during such an appointment as they would FINALLY come to the realization these ordinary Australian families will NOT pay a fee for basic insurance advice in ADDITION to the upfront premium required to start their cover. Premiums that increase never-endingly.

  • Old risky

    This “report ” finally illustrates the half-truths in this debate perfectly. Folks who say they can charge fees for insurance advice are engaging in this debate on false premises. They are not risk-only writers and its time the promoters of fees for life risk, particularly in the Mum & Dad market with no investment funds, fess up. The M&D market will not pay the fees needed to be charged, even with the 30% reduction in premiums supposedly available on NIL commission. Promoters of solutions based on nil commission for risk miss the point
    Put the promoters of fees for risk to one side – here’s a question for the insurers. Do they honestly think that an adviser who takes an appropriate fee, and nets the product ( no clawback ), will owe any allegiance to any insurer to keep business on the book. That’s why renewal is paid – the adviser has an incentive to help preserve the insurers long-term profits. For over 150 years, this system has worked – to every ones advantage. Its business 101.
    No incentive, no care. Is there anyone at the insurers who get this concept, and the threat to their business if advisers go for NIL commission

    • Concerned Economist

      You are right Oldy! M&D will NOT pay fees even with the 30% premium reduction due to NIL commission. I have long struggled with the inability of the life companies, industry ‘experts'(!) and authorities to understand this. They wouldn’t know, of course, as they’d never leave their comfy offices to go talk to real clients in their homes. Disgusts me. So much for “Clients Best Interests”. What unmitigated absolute hypocrites these entities are! Self interest is another concept that comes to mind – self interest to replace client best interest.

  • Mark A. Harris

    More half truths and myths. “Old Risky” is correct, less than 5% of the Australian population “PAY” for advice, the rest just want to someone to assist them without paying for the assistance upfront. “Commission” is NOT a DIRTY word, it’s just another method of remuneration which is used in ALL retail businesses models.

  • WB

    Sue, I have read your article and I totally agree that the true risk only adviser is more than just someone selling life insurance. Whether it is referred as ‘family protection advice’, or a ‘risk management strategy’, etc, such advice raises our profile as true professionals. And let me add, it is the way I provide my advice as well as every other risk only adviser than I know. Nevertheless it will be interesting to see your presentation. Thanks for responding.

    • My pleasure WB. Please come and say hi in person if you make it to the roadshow.

  • MLC

    It never ceases to amaze me, the government is now dictating how we earn an income. Its happy to see this change for the benefit of the consumer, what benefit ? how does the consumer benefit from fee for service? as Old risk said the M&D market will not buy it, I tried to introduce a fee for service to a client who paid $105,000.00 this renewal, he said why ill just deal direct with the insurance company, and he is correct, I have only 70 clients a fee for service, not one of them will pay, they all pay near $50,000.00 a year in premiums and believe they pay enough. My worth yes, I am worth the commissions I get paid. I work dam hard to service these clients and service is what they get. Claims is the real cost let them deal direct and see what happens.