Seeing More Clients Will Not Save Risk Advice – ClearView

Risk advisers are unlikely to survive under the LIF changes by selling more insurance or seeing more clients and should consider expanding their services or implementing a mixed fee and commission model, according to ClearView.

ClearView General Manager of Distribution, Christopher Blaxland-Walker

The life insurance provider also recommended that risk specialists consider diversifying their skill sets or partnering with advisers who provide non-life insurance advice to meet a growing demand for holistic advice.

ClearView made the recommendations in a recently released whitepaper – An Advice Revolution – authored by General Manager, Distribution, Christopher Blaxland-Walker and Head of Distribution Strategy, Kathryn Williamson.

The paper stated “a key strategic priority for practices should be to boost their fee income and expand the scope of their advice”, adding, “This is doubly important because it’s only a matter of time before there are renewed calls to ban insurance commissions altogether”.

It claimed there were only four ways risk advisers could increase their revenue:

  1. See more clients
  2. Sell more insurance to existing clients
  3. Charge a fee for insurance advice in addition to commission
  4. Expand the scope of the advice.

The paper added the first two options were not sustainable and would not halt a decline in revenue.

“In order to maintain the same level of cashflow under LIF, advisers need to see 25-50 percent more clients in 2018 and around double the current numbers from 1 January 2020…this is just to stand still,” the whitepaper noted.

“…to maintain the same level of cashflow under LIF, advisers need to see 25-50 percent more clients in 2018…”

Additionally, further sales to existing clients still had to meet their best interests and they must be able to afford the extra cover, leaving the third and fourth options, or a combination of both, as the only viable strategies for sustainable growth, according to the paper.

The benefits of these strategies would be to produce an additional income source, be paid even when a client does not proceed with a life insurance application, and reduce the impact of clawbacks, the paper stated.

The whitepaper also highlighted that remaining a risk-only adviser was an option and “…there’s a strong case for being a specialist in any occupation, provided you’re an exceptionally good operator and can continue attracting and winning new clients,” the paper added.

At the same time, it warned that Australia’s ageing population was seeking more holistic advice that considered their total financial needs and goals, and research suggested the best strategy for most advisers was to expand their value proposition.

“For many advisers the idea of strategic advice is not new. They’ve been doing it for years (it’s called financial planning),” the paper stated, adding advisers were at a crossroads and would be required to make a choice.

“They can choose to accept regulatory reform and make changes to grow their business or do nothing and hope for the best. Both options carry a degree of risk. Arguably, doing nothing is a bigger risk given change is inevitable,” the paper noted.

  • paulkate72

    What our Clearview mate said above rings pretty true. Marilyn Monroe’s husband, Arthur Miller, wrote “Death of a Salesman” about that very thing.

    It seems our industry won’t just be the death of many “salesmen”, but the death of a whole industry – the life insurance business! What a tragedy and what a monumental loss.

  • Alleycat

    The comments by Clearview and yours couldn’t be more correct.
    No one will survive on a fee for service model that relies on risk premium.

    The LIF legislation and the absurd ignorance of government coupled with the avaricious promotion by the FSC cartel have guaranteed the death of the life industry.

  • Daryl La’ Brooy

    It’s amazing the FSC didn’t see this coming or chose to ignore the consequences when they lobbied the Federal Government to bring in LIF. The Insurers collectively saved about $250 million in commission payments (advisers lost this money), only to now start suffering long term consequences. Given the FSC CEO’s poor performance at the Royal Commission the stuff up is not surprising.

  • Ken

    If you choose to be a GP you study to achieve that If you want to become a specialist in one or two areas you study for it
    There is no one looking over your shoulder and pushing you into areas you may not be comfortable in or be able to produce the expertise it takes You simply may not be “cut out” for it and could make serious irreversible mistakes
    Why is it then that everyone is being herded like sheep in directions they don’t want to go or feel they may not be apt at.
    Simply no reason other than it’s assumed we will all follow and the insurers will save millions in commission payments.
    For some it may be the only option to survive put food on the table pay the mortgage and the massive loan they recently took out to buy their partner out
    We don’t all want to specialise in areas we are not comfortable in yet here it is
    We can now all be the most educated people on the dole cue

  • Warren

    Chris, if there is a nil commission on an insurance premium, the premium only reduces by 30%, as we all know. The adviser still needs to be paid. But as it has been said time and time again – clients will NOT pay a fee to their risk only adviser AND an insurance premium! This applies to nil commission or a reduction in commission. So none of the above 4 ways will assist advisers increase their revenues.
    The only way the retail life industry in this country will survive is when the government amends LIF – reinstate commissions, get rid of this evil 2 year clawback and apply common sense to these ridiculous FASEA impositions. I challenge ALL retail life insurers – you must go to the government collectively, i.e. as one – and TELL them LIF must be amended. Zurich submitted a paper about two years ago which brilliantly set out the ramifications of the then proposed changes. My understanding is that it was written by Phil Kewin, who is now the AFA president. Get Phil on board and have him join you. Unless something like this happens, you will see the demise of the retail life insurance industry in this country. Don’t give up. Stop this defeatist attitude. Fight, fight and fight!

    • paulkate72

      Agree with your comments, Warren. LIF has or will bring the life-risk insurance industry to its knees, and if LIF doesn’t, FASEA certainly will. These draconian new laws/amendments will have to be repealed for the industry to survive.

      The US repealed Prohibition 85 years ago as we speak, bringing an end to the madness that it caused. Now the only thing that will save life insurance is for the LIFs, the FASEAs, and all the other silly terms to be repealed, and then we too will see an end to the madness that it’s caused.

  • Jeremy Wright

    The conversation the Life Insurance Companies need to have, is do they want to
    continue in Business or not?

    As usual, the plethora of arguments have clouded the real issues, which are not

    It is very simple. To bring a future back to the Industry, why not try the following;

    1) Stop increasing premiums above 5% p.a, which means pricing the premiums correctly to start with. A 8% or more premium increase = lapses.

    2) Bring in a fairer claw back regime that punishes advisers who churn and protect
    innocent advisers who now are responsible for everything that occurs, including
    large premium increases that means a lapse and write back.

    3) Stop these insane proposals that the way to fix issues the Life Insurance Industry
    brought on itself, is to tell advisers they need to charge fee’s which will not
    work and to also broaden their service offering which is easier said than done..

    That proposal is like the car industry saying in order for their sales dealerships to survive, they should start selling fruit and vegetables.

    Is the Life Insurance Industry that short of experienced, intelligent management, that
    they still cannot see the issues we face today, have been inflicted on us and all Australians by themselves?

    100% of the fault and supposed solution, lies with the Life Insurance Companies, led by
    the FSC.

    Clearview are correct in saying that the current regime will mean a mass exodus of
    experienced advisers.

    They are totally wrong in assuming that the way to fix this problem, is to put even more
    pressure on advisers, by forcing them to take on more risk, higher expenses, more onerous meaningless ongoing education and then saying, we also will pay you less for taking on all the risk and expense, so just pass these losses and extra expenses on, by charging fee’s to clients who will not pay and also, just go out and get extra degrees so you can start advising in areas you know nothing about and do not want to be dragged into.

    The other obvious problem, is that all this diversifying will mean less time advisers can
    devote to writing Life Insurance and looking after clients in this area.

    There are only so many hours in a day.


  • Just About Done Now

    One comment from me on this as I’m just so frustrated and gutted by what’s happened to this industry since I joined it 11 years ago.

    This industry is completely broken now. The full impacts just haven’t been realised yet.

    Unless FASEA, life insurance companies, corrupt / greedy industry bodies like the FSC and Federal Government MP’s (who have no understanding or financial service industry qualifications whatsoever) quickly realise the future impacts of what they’ve done and rectify it, then there won’t be an retail life industry left in Australia. This will of course result in the exact opposite of what all these bodies SAID they wanted – which is better outcomes for Australian consumers.

  • Jimbo

    Its obviously better to have a partner offering full advice. Thanks ClearView. But i dont see how seeing more clients will not build a sucessful business. Its all about seeing more clients.

    On another point. Only the “old riskies” and the “advisers” who have worked under the direct sales model and General Advice are unable to discuss investments and super with clients. A Superannuation discussion and finding out current arrangements is a necessary part of the insurance process and often clients also want to discuss their investments.

    FASEA will fix this. The oldies will retire and everyone giving risk advice will be competent in superannuation and investment. Its just a pity that insurances are able to be sold under general advice over the phone with no Best Interests Duty or SOA.

  • TB

    When LIF was first “introduced” the BDM’s were coming out with calculator tools to “help” you calculate how much more business you would have to write to earn the same i.e. see more clients. Now the same BDMs are saying how they are seeing a drop in new business by 30+%.
    The FSC members were greedy and now they are seeing how they will also be destroyed by the LIF because clients don’t want to pay fees for risk advice and advisers don’t want to write it at a loss.
    The same FSC members response now is to all cut premiums on new business only whilst raising rates on existing customers and actively trying to encourage a churn issue that was not there in the first place.
    If Clearview and the other FSC members want to keep their own jobs their only option is going to be to be to admit the corruption and fix the LIF.
    Otherwise the insurers are just as doomed as the advisers and customers.

  • Mervin C Reed FAICD

    Well the Life Insurance companies who pay fees to the FSC got exactly what they paid for. The brains trust that thought up this stuff in the FSC also went on to destroy Suncorp.
    The slow and sure wind down now of Life Insurance as a product is entirely due to Banks who stripped out the endowment and Whole of Life Products out of the offering to enable them to pillage the number 1 funds of the Life offices.
    Great for bank exec bonuses but now with billions to be paid in compensation not so great.

    The companies Like Clearview are having a go, trying to seek solutions. If they get smart and stop trying to emulate the other Life companies and have a superior underwriting offer then they will do quite well.

    As most of the overseas life companies have found – electronic underwriting is good for 25% of the cases that would have been paper cleanskins anyway. All that has happened is that the Life companies have transferred the keystroke capture from them to the adviser who now if they are smart just transfers it back.

    All in all a dogs breakfast, but when the cash flows keep falling as they will, the pressure will come on as the loss of revenue for the Federal and State governments (10% of each life contract premium is stamp duty) will start to hurt badly.

    Only then will there be some move to change.

    We are 2 years away from that yet.