January 30, 2018
Less than three per cent of consumers would be willing to pay $1,000 or more for life insurance related financial advice, according to research from online insurance provider, NobleOak.
In a recently released research whitepaper, Life Insurance in Australia – Consumer Behaviour Transformation, NobleOak found consumers had become price sensitive and many were unwilling to pay for advice and made the decision to not continue with insurance or not purchase cover at all, based mainly on price.
The research, conducted in December 2017 by Pureprofile Australia, covered more than 1,000 people between the ages of 30 and 60, of which more than half had a current life or income protection policy.
Of those surveyed,
- 55.9 per cent were unwilling to pay anything for life insurance related financial advice
- 23.7 per cent said they would up to $100
- 15.2 per cent would pay up to $500
- 2.6 per cent would pay more than $500
- 2.7 per cent would pay more than than $1,000
NobleOak stated the findings pointed to a problem with the perceived value of life insurance advice and presented “…a significant challenge for financial advisers who often need to fund high upfront advice costs to provide the right advice under strict compliance rules to their clients”.
“Price continues to gain momentum as the determinant of choice for many consumers when it comes to life insurance…”
“Clearly illustrating value to clients has always been a challenge for many advisers, and with the increasing access to online information and resources that consumers have, this is getting even harder,” the paper stated.
Price was also the key determinant in purchasing cover with 80.5 per cent of respondents stating the cost of premiums was the most important factor when purchasing life insurance, well ahead of features and claims reputation at 57.1 per cent and 52.9 per cent, respectively.
The survey also found that when respondents were asked why people don’t buy life insurance, 44.7 per cent believed it was due to its high cost, while 49.4 per cent of respondents that had life insurance but did not plan on keeping their policy said high costs were the reason for their decision.
“Price continues to gain momentum as the determinant of choice for many consumers when it comes to life insurance and income protection cover,” the paper stated.
“In the absence of any significant innovation, products are becoming commoditised as consumers’ increasingly opt to deal directly with insurers online rather than seek financial advice,” it added.
“It appears that legislative and regulatory parameters have limited the ability for life insurers to differentiate their products in a way that is truly meaningful to the customer. So the customer is attracted to value, comprising largely of low price, good reputation and some product features.”