New research hot off the press is reporting the proposed LIF reforms are already impacting the way advisers are positioning their business model, including their client proposition.
In one of the critical findings in the Investment Trends 2016 Planner Risk Report, the research firm has revealed that while the commencement date for the proposed Life Insurance Framework reforms remains unclear, ‘…many planners have already begun adjusting their business models in anticipation of the reforms.’
A statement accompanying the release of this detailed annual report noted the average adviser ‘…has seen risk advice fall from 35% of their total practice revenue in 2015 to just 28%, the lowest since 2013.’ It added that a number of planners have even stopped providing risk advice altogether, with 12% not writing any new risk business in the last year, up from 10% in the previous study.
…more than two in five planners expect their practice’s profitability to decline if the LIF reforms are implemented
Investment Trends Senior Analyst, King Loong Choi, commented that “The LIF reforms are already testing the business models of financial planners across Australia…Not only are they already reporting a fall in risk business, more than two in five planners expect their practice’s profitability to decline if the LIF reforms are implemented.”
The research firm also revealed findings demonstrate that if the LIF reforms are implemented, many planners will look to make three key adjustments:
- Provide insurance advice as part of a broader holistic package more often
- Charge more for holistic advice
- Focus more on higher balance clients
“This shift is already underway, and planners intend to continue adjusting their business models in this way if the reforms are implemented,” noted Choi.
Insurers must solidify planner relationships
Focussing on the growing importance of retention, another critical finding in the research was that half of planners surveyed said they stopped writing new insurance business with at least one insurer in the last year.
…the top reason planners switch insurers is because they found a better deal elsewhere for their clients
Recommending that life companies must actively promote the competitiveness of their offerings, the report documents the top reason planners switch insurers is because they found a better deal elsewhere for their clients:
“The recent media scrutiny has triggered planners to demonstrate they are picking the best insurers for their clients,” said Choi, who also advocated that insurers should grow their brand awareness among consumers “…because it is easier for planners to recommend an insurer if the client has already heard of them.”
Choi said insurers can improve retention and reduce attrition by being responsive to planners’ needs and keeping them satisfied. He said some of the opportunities for differentiation include:
- Addressing any inefficiencies in the application process
- Providing planners with great support
- Improving their brand image among consumers
“There are great opportunities for insurers to benefit from switching activity, but they also need to be careful to not lose out from this.”
BT Life Achieves Top Honour
In collating adviser feedback on individual life companies, the Investment Trends 2016 Overall Satisfaction – Insurer Award, was won by BT Life, where it achieved the highest user satisfaction score in this year’s study. The top three life insurers by user satisfaction are:
- BT Life
- AIA Australia
- TAL
so how are these reforms helping clients that may not have much money or are just seeking risk specific advice?
I FIND IT DIFFICULT TO BELIEVE YOU CAN CALL YOURSELF A FINANCIAL PLANNER AND NOT GIVE RISK ADVICE. !! Surely financial plans take into account all aspects of a person requirements ? Not much good if your Super is performing wonderfully but you lose your house and other assets because you forgot to put insurance in place to protect them !
Ken not sure what your comment has anything to do with what I was saying.
Sorry Robert the comment was not pointed at you ! It was meant to be a generalisation of people in the industry. Who is going to get singled out for scrutiny if someone pays $5000 for advice and loses their home because risk cover was not considered in the overall plan.
No probs Ken 🙂
Independent advisers are the only ones who can provide unbiased Risk Advice. Risk Advisers tied to the Insurers/banks should be called Bank or Insurance Sales people not advisers. Come on independents, lets just support the Insurers who supported us. Zurich, ClearView and BT are the only ones who care about their adviser network and only Zurich and ClearView (maybe BT but i am not aware of it) spoke out against these changes. Only write policies with these 3 companies and the other greedy insurers will see what happens when you bite the hand that feeds you.
Sounds quite biased yourself to only consider those particular 3 companies!
If the limitation of your risk advice is product based, than you are missing the importance of strategy in an insurance plan. In the end, the conversation should be outcome based, backed by an appropriate product (which could come from a range of insurers) not product based.
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