The direct life insurance sector has not increased substantially over the past three years with growth being offset by lapses and policy closures, according to research company, Strategic Insight.
Releasing its Direct Life Insurance Report 2017, Strategic Insight stated that direct insurance makes up 25 to 30% of the individual risk market and has remained constant at that level for the last three years despite the release of new products and intensive marketing activities by life insurance providers.
According to Strategic Insights, around 50% of the $1,132 million of individual risk inflows recorded across 2016 went into Term Life products ($562 million) and a further 29% ($328.3 million) went into Funeral Cover. Income protection attracted 12% of inflows while Accidental Death, Trauma and TPD recorded single digit levels of inflows.
“…a very large part of new premiums are being offset by lapses and policy closures”
Strategic Insight stated the total amount of inforce direct business, including Risk Lump Sum and Income Protection, was $1,496 million as at December 2016 “…in-force business has continued to grow very slowly” and “…a very large part of new premiums are being offset by lapses and policy closures”.
The group also found that direct premiums were more expensive than adviser premiums across Life, Trauma and IP with the gap between these opening further as direct premiums increased and advised premiums decreased.
The finding echoes those of research released by lifeinsurancedirect.com.au in mid-2016 which found direct insurance was 25% to 45% more expensive than advised insurance for men and women aged 25 to 55 (see: Direct Insurance Consistently Overpriced).
We are looking at the consequences of an Industry that is cannabilising itself due to a lack of understanding of it’s own strengths and weaknesses.
The one overriding strategy, must be to provide “inclusive” opportunities for all Australians to get Life products they understand and this has been a total failure in Australia.
What we have, is a mish mash of complicated policies, hiding behind legal wording that deliberately confuses people and leaves them exposed to shonky sales strategies by big and small players alike.
We also have a Government who clearly are confused and continually led down the wrong path by vested interest groups like the FSC.
Direct is the fast food of the insurance world.
You have it once or twice, the initial flavour and marketing sucks you in and you believe for a short time you have satisfied your need. After a while you realise what it’s made of and that too much of it doesn’t make you feel good. You then don’t want any more of it as you work out that its probably not in your best interest to continue having it.
The Direct Insurance marketing model is based around a knee jerk, impulse purchase based on consumer’s fear and feelings of vulnerability.
The fast food industry bases theirs on a visual of food that when actually received, looks nothing like the fake, coloured up, “food modelled” example on the ad.
What you receive over the counter is entirely disappointing compared to what you thought you were going to receive.
Direct is the drive thru…….it is quick, easy and appears to be cheap.
In reality, it will probably end up causing health issues when you try to make a claim and cost you a lot more than you believed you saved.
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