Life insurance advice and products need to increase their level of transparency with consumers to re-engage with them and overcome the decline in public confidence in the sector, a new whitepaper from ANZ has claimed.
The paper, Life insurance: the case for change, called for life insurers to invest in innovation but also to engage with heightened compliance requirements, despite their potential to absorb time and resources normally devoted to product development.
This could take place by insurers accepting “…not just the letter but the spirit of regulatory concerns by creating transparent, core-purpose insurance products that are clearly communicated to the market”.
“Transparency in product design may become more important as insurers introduce innovative, technology-driven solutions for underwriting and product delivery,” the paper stated, adding, “And such an approach will also go some way to re-establishing trust and positioning insurance and insurers in a more positive light to the market and authorities”.
The paper also stated this transparency should extend to advisers and their fee structures so as to provide clarity and reassurance to consumers that their best interests are being recognised.
“Most clients are happy with fees when they understand them and they trust advisers when they are in a transparent relationship”
Commenting on the paper, ANZ Wealth Head of Life Insurance, Gerard Kerr said regulators were looking from end to end of the life insurance value chain and fees would remain an ongoing part of reviews going forward.
“Most clients are happy with fees when they understand them and they trust advisers when they are in a transparent relationship. It is a model that is working well and more people should probably use it,” Kerr said.
The paper noted financial advisers played an important role in making life insurance clearer stating “…they are a very significant partnership channel for life insurers and act as a relatable interface between what are sometimes necessarily complex products and customers in need”.
While packaging financial advice with insurance products was an effective solution to tackling consumer confusion, the paper stated that insurers could do more towards creating products that were more cost effective or provided ‘straight forward cover’.
“The final piece of the puzzle is likely to be the introduction of more targeted and clearly differentiated products that leverage new technologies for seamless, personalised underwriting and tailored communications,” the paper stated.
“Introducing clearer products does not necessarily mean restricting or reducing the depth of cover, simply a return to the core purpose of insurance: helping to restore claimants to the state of health and prosperity they enjoyed before they became sick or injured, so they can resume their place in the workforce and continue to enjoy full and satisfying lives,” the paper added.
Gerard, you are correct in stating that Life Insurers should be more innovative and to
make insurance much more clearly communicated.
However you are wrong when it comes to your statement saying most clients are happy to pay fees and it is a model that is working well.
Can you please clarify this statement, as there has been overwhelming evidence to say
the complete opposite.
If you are going to put pen to paper, then be prepared to back up what you are saying.
The real facts, are that holistic full financial planning advice practices can charge fees, though I have not heard of one practice that is doing it properly.
The only way a proper analysis can be done, is to separate the risk advice area from the Investment advice area and clearly articulate to the client, the fee for risk advice only, then see what reaction there is from clients.
Many full advice practices are creating false data, as they do not fully understand
the REAL cost of providing Best Interest retail Life Insurance advice and are not operating that part of their Business as a separately costed division with its own P & L and then subtracting the NB and existing trail commissions earned, to come up with a complete and accurate report as to the sustainability of fees.
In other words,what clients are “actually” paying for their risk advice and implementation, rather than all of us having to listen to platitudes from ignorant people who do not truly understand how the retail Life Insurance Industry works and how the vast majority of Australians think.
If any practice in Australia has made a successful transition, with clients clearly
understanding and willing to pay fees for all the work involved with Life Insurance advice, then we are all ears.
To date, not one practice has been able to articulate this, so clearly there is a major
issue with the propaganda being spewed out and what occurs in the real world.
If there were a few Businesses that had cracked the fee mirage, a few Businesses are not an entire industry and if the vast majority of Australians say NO, then within two years, adviser practices across Australia, will start to see and realise, that reduced earnings, with more risk, is not a good business model and they will then make the obvious decision to close down that part of their Business that is making losses.
How can that be good for all Australians?
I have no doubt the fee structure is working well !! When it’s included in investment advice and the life cover is “tacked” on as part of the overall plan !!
Talk about transparency NOT!! I would like to hear from these people that supposedly have a risk fee supported client base ? You have no doubt solved the industry issues I have faced for 40 years and would love to know how you did it it could maintain my business for snigger 49 years !
No one likes fees wether they understand them or not !! Accountants charge them and we all say thanks for that fee once I pay the tax man I will fix yours up thanks for this financial mess I could never had done it without you !??
As I have said before TAX RETURNS are compulsory and you need to pay someone to help you with getting them done Life cover IS NOT so if additional fees are required for what should be simplistic understanding and implementation than I will do it myself direct !! After all this always happens to some one else
If your going to talk transparency as Jeremy has indicated be prepared to name names and events This while LIF mess has been a series of ” smoke and mirrors” since it started
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