Consumers will benefit under the Life Insurance Framework (LIF) as life insurers make changes to attract and retain new business despite premiums being unlikely to fall, claims an adviser technology service provider.
SuiteBox Regional Sales Manager APAC, Andy Marshall who until recently was with Zurich but has since joined Suitebox, made the claims in a column published on Linkedin where he stated there was a danger that LIF could lead to infighting instead of industry self-introspection that examines the threats to a viable advice and life insurance sector.
He stated that despite concerns that LIF would not benefit consumers, advisers should be looking for consumer orientated change to come from life insurers who will have to work hard to retain both consumer and adviser loyalty under any new commission regime.
“If you accept that 50% of new business to an insurer is actually replacement business…and that level of replacement is reduced, then the insurer needs to think pretty quickly about something that will attract business,” Marshall said
“Customer benefits in this industry are there for us to lead, and create, they are not for us to expect to be delivered without any change to what we do now”
“And without a premium lever to pull then it needs to be something like: customer loyalty and engagement programmes, additional and adjunct policy holder services, efficiency, simpler products, simpler underwriting, better adviser services that maximise adviser business efficiency and tools and resources that allow an adviser to engage their client more effectively,” he added.
“Take away LIF and there is no reason to do any of the above (in an express manner). This is because for a well-run insurer that is working on internal efficiencies, then a 110% and 10% model, actually works pretty well.”
Marshall said a failure to make changes, at both the insurer and adviser level, had the potential to allow for new entrants to disrupt the market and that current models would do little to prevent that.
“If insurance companies don’t look at a complete full chain innovation piece and if advisers don’t innovate and the status quo is kept then watch out. Because from overseas players will line up and bring disruptive innovation and client engagement that will capture the attention and the wallets of Australian life insurance buyers and I struggle with how someone using the current insurance process will compete with that,” Marshall said.
“Customer benefits in this industry are there for us to lead, and create, they are not for us to expect to be delivered without any change to what we do now. Status quo for advisers and insurers is a recipe for disaster.”
Thanks @riskinfo for printing a significant part of the blog. Taken out of context without all the points I made looks like I’m championing the legislation which I am certainly not doing. A good deal of my blog looked at the economics for the advisers and that is not pretty reading. I also stressed the need for a strong advice community. The time for efficiency and progress in product, uw, and engagement simplicity is something the advisers can demand from insurers – and those that do it will garner adviser support and then be able via cocreation of product and process with advisers to shape the marketplace and that is what will drive consumer benefits.
https://www.linkedin.com/pulse/consumer-benefits-lif-andy-marshall
@ Andy Marshall
I challenge you to verify that 50.0% of new business is old business being recycled, but even if that’s remotely true consider the following because this is part of what we have had to deal with.
1 One insurer increased their Group Rates by 85.0% just over 15 months ago with 2 months notice to adsvisers.
You could rewrite the same cover with the same Life company using their retail product for 40.0% less.
In the client’s best interest what would you have done as an adviser,… left them where they were ?
2. Your own former employer took the best IP product off the market last December and offered the consumer an inferior one to replace it. They also increased their premiums by 12.5% and if you added the rate for age increase to that, existing clients received a 22.5% increase in their premiums in one 12 month period.
And unless you were classified a professional, an increase to the existing contract was unavailable and only the inferior could be offered.
In the client’s best interest’s what would you have done as an adviser, in most instances left them where they were ?
3. Another Life company who has been in the news recently in regard to claims for all the wrong reasons decided to increase their IP contracts with Lifetime benefits by 53.0% over a 2 year period.
In the clients best interests, what would you have done as an adviser, leave them there?
The clients, mainly professionals who had never had a claim over the 14 years with the company, wanted to be moved.
4. Recently we had the experience of wanting to increase the life cover of an Accountant and his wife who had been with another insurer for 16 years. After 3 weeks of failing to get quotes, we put the clients somewhere else.
In the clients best interests, they saved over $650 on their premiums and yes we got paid. It was never our intention to replace the clients insurances.
But in the clients best interests as an adviser, what would you have done, leave them there ?
Your article should have focused upon the lack of morality shown by Life insurance companies and the pretext for the LIF changes have nothing to do with poor advice, churning or lack of profitability by the Life insurance industry.
If that was the case, then perhaps you can explain why Life companies didn’t name and shame the “churners”. They know who they are ?
Perhaps you can explain why not one Life insurance company was first to move to independently increase their premiums and reduce commissions to advisers, but did so once the government instituted their LIF agenda.
If you believe otherwise, then you will have the answers that most honest hard working client focused advisers would like to know.
Otherwise all this is just a crock and that is why the advisers are pushing back and why those who purport to represent the rank and file have failed their constituents.
It is funny that most people who support LIF are on salary
Unfortunately the MUCH NEEDED investment in processes and systems and under-insurance repair work is being eaten up by the expense of submissions to PCs, PJCs, fast moving yet rigid regulatory frameworks, consolidation, manic and paranoid compliance monitoring and even back-ending old advice with new laws. How are even well-meaning insurers meant to reduce premiums in this kind of environment? After 26 years its safe to conclude, this is the worst time in our industry and still there is no end in sight…
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