The continuing growth of the direct insurance market has raised concerns within elements of the adviser community about whether their services may become redundant over time.
Our latest poll question asks:
Are you concerned that increasing direct insurance sales will have an adverse impact on the future growth and profitability of your advice practice?
The question of whether direct insurance is a friend or foe to financial advisers has been under discussion for some time now, but has been flamed by recent reports of the continuing growth of this market sector (see: Insurers Should Not Ignore Direct market Growth). Some advisers see the growth of direct insurance sales as direct and long term threat to the personal advice services and solutions they currently deliver.
Advisers who do not see direct insurance as a threat believe that either their own business model serves a different consumer segment, or that a prospective client who holds a direct insurance policy has already shown commitment to the need for life insurance and is more likely to consider revised and/or additional solutions appropriate to their needs.
The debate over whether personal advice and direct insurance solutions can co-exist over the long term means most advisers will pause at some point to consider the question of how they currently add value to the client relationship, and what that value represents. A simple example is where personal advice can assist clients appreciate that taking out a $300,000 death-only life insurance contract to cover a mortgage may only represent a small element of the broader protection coverage they need.
While there may exist a proportion of the community whose total insurance and protection needs can be fully covered by direct insurance solutions, advisers would still be asking their prospective clients whether those product solutions provide the most appropriate pricing and policy definitions, including potential pre-existing conditions and other exclusions.
How do you respond to this question when taking into account your own client value proposition and when considering the future potential of your advice practice? Let us know what you think…
Direct life insurance will have an impact and it already is having an impact on the Life Insurance Industry.
The combined retail Insurance premium lapses amongst all the Insurers is substantial, which will cause some carriers to withdraw from the market over the next 10 years.
Some commentators have stated that lapse rate increases are a normal cyclical event, though I feel they do not fully understand that normal cyclical events, are no longer normal.
If we cut out the theoretical assessments and take a practical look at why direct Insurance will continue to take a bigger slice of the pie at the expense of retail Life premiums, they are as follows;
1) People are more aware because of a multimillion dollar TV, radio and online advertising blitz, that Insurance is now quick to attain, cheap and no forms or medicals to worry about.
2) People are concerned about their cost of living expenses and when their expensive retail premium renewal notice arrives, it is now easy to get on the phone or online and compare the price. Obviously clients do not understand policy differences and if things are a bit tight, people will cancel their retail policies if it is easy to replace. Even though we in the Industry know the client is jeopordising their financial position and future by taking contractually inferior policies, clients do not know the full implications, though they do know they can save hundreds and thousands of dollars, which is an attractive proposition.
3) The retail Life Companies make it seem difficult to attain, maintain and retain the Insurance policies and over many years the resounding Huon cry from our clients has been, why is it so hard to do business with Life Companies who do not seem to understand that all we clients want, is some certainty of why we should stick with our current insurer, which includes, ease of access, and plain English correspondence that sells the very reason why our Insurance is the best investment to have.
As usual Jeremy W. is spot on! I think that IF life companies are going to persist with direct selling then it should be limited to accident only death cover and term cover. Any of the more complex policies with multi faceted contractual definitions are too complex for ‘most’ people to come to terms with or at least understand to a degree where they can make an informed choice. Advisers fit in here perfectly! Income protection and trauma policies should ONLY be sold by qualified advisers as there is simply too much at stake for the client if uninformed decisions are made. I’ll paraphrase the old saying which goes, “it is only at claim time, when the rubber hits the road, that the client knows if they have originally bought the right policy – at which point it is too late if not”. Keep the faith fellow advisers!
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