Adviser Loyalty to Insurers Falls Away

The number of life insurers used by financial advisers has fallen to its lowest level in three years yet more than a quarter of advisers are looking to establish a relationship with a new insurer in the next 12 months, according to Investment Trends.

Data released as part of the research group’s ninth annual Planner Risk Report has revealed that advisers providing life insurance advice are only using an average of 3.6 life insurers, down from 3.8 in 2016 and 3.9 in 2015 – the highest level recorded in the history of the report.

The report also found that 47% of advisers stopped using at least one insurer in 2016, a minor increase on the 2015 figure of 45%, but a significant increase on the 2014 figure when only 35% of advisers said they stopped using at least one insurer.

Investment Trends found that while advisers were ending a relationship with an insurer they were engaging in new relationships with other insurers but the take-up rate of the latter had fallen in recent years.

According to the research group, in 2013 advisers stopped dealing with 0.8 insurers on average but engaged with 1.1 other insurers. This pattern continued into 2014, where advisers stopped using an average of 0.6 insurers but engaged with 0.9 other insurers.

This trend, however, has reversed during 2015 and 2016 with advisers no longer using an average of 0.6 insurers and only engaging with 0.4 insurers instead.

Investment Trends also found that high switching levels were likely to continue with 27% of advisers who had a role in selecting a life insurer stating they would establish a relationship with a new insurer to replace an existing insurer or to add to their list of current insurers.

A further 18% of advisers said they were not currently considering a change but would be open to doing so if they found a better insurer.

Underwriting processes ranked highly among reasons why advisers remained or left an insurer with good underwriting processes named as the leading reason advisers chose to use a particular insurer for the third consecutive year.

This was followed by product features and policy definitions while high premiums and poor underwriting practices ranked highly among reason as to why an adviser stopped using an insurer in the last 12 months.