Latest findings from Beaton Research and Consulting highlight conflicting adviser opinion on whether it is becoming harder to attract new customers.
This outcome is one of four key findings that have emerged from the research firm’s latest adviser sentiment (IFA Market Pulse) report. These findings, where the theme of this wave of research was “Industry Growth – Fact or Fallacy”, reveal:
- Advisers generally report life risk business growth of up to 30% in the last 12 months
- However, advisers are polarised on whether it is becoming harder to attract new customers
- Customer lapses do not appear to be a major concern for the industry
- Advisers predict a bright future for the life insurance industry through stability and growth in the next 12 months
Beaton says advisers gave mixed responses about the difficulty involved in attracting new life risk clients. Responding to the question:
Has it become significantly harder in the last 12 months for you to attract new life risk insurance customers than it has been in recent years?:
- 33% of advisers agree that it has become significantly harder to win new life risk insurance customers
- Just over a third (37%) do not agree with this statement
- Just under a third (30%) are unsure
Director of Research at Beaton Consulting, Dr Rebecca Sheils, said she believes this divergent result possibly reflects the different client portfolios held by each adviser. According to Dr Sheils, a higher socio-economic client base may, in general, be more disposed to wealth protection needs in the wake of the Global Financial Crisis.
But on the other side of this equation, advisers whose client base comprises middle to lower income earners could be receiving a different message. These clients might view the cost of insurance as one of the expenses they should eliminate or not take up in the first place because of tighter economic conditions stemming from the GFC.
Beaton also notes the state-based exception to this result lies in Queensland, where almost 50% of advisers are finding it harder to win new life risk customers.
In other findings:
- Nearly half the advisers surveyed report life risk business growth in the last 12 months (even higher among younger advisers), with most of these suggesting growth was in the realm of 11% and 30%
- More than a quarter of advisers report increases in life risk customer lapses in the last 12 months (higher in Queensland). But when quantified, these lapse increases are generally by margins of less than 10%.
- More than one third of advisers predict life insurance industry growth in the next 12 months,with most making ‘bullish’ predictions of growth in the realm of 11% and 30%.
Reasons given by those advisers who are bullish about the future growth prospects of the life insurance sector centre around:
- Increased awareness about the importance of risk insurance
- Economic recovery on the horizon
- Tapping into the underinsurance problem
- Advisers working on increasing share of wallet
Reasons documented by advisers who are less optimistic about future growth for the life insurance sector include:
- Poor publicity
- Customer resistance and confusion
- Tougher times characterised by increases in interest rates, higher mortgages and a grim economic outlook
- Increased competition (particularly from industry funds)
Wave 3 of the Beaton IFA Market Pulse will be conducted in November 2011.
