Financial advisers are evenly divided on the question of whether the growth of direct life insurance sales will have a negative impact on their business.
As we go to print, 46% of the hundreds of advisers who have already voted in this poll have answered ‘yes’ to our question:
Are you concerned that increasing direct insurance sales will have an adverse impact on the future growth and profitability of your advice practice?
43% of advisers say they are not concerned with the impact of direct insurance sales growth on their business, while 11% remain undecided.
Comments we have received are mostly from those who hold concerns about the the growth of direct insurance sales, not only on their own advice practice but also the impact this may have on the credibility of the life insurance industry and on clients, particularly at claim time.
There is concern amongst advisers that many consumers who buy the simpler, ‘no advice’, direct insurance products do so without being appropriately informed:
“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.”
This adviser added:
“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.”
Another adviser raised the question of who will be supporting the client at claim time:
In the years to come there will be claims. For those who bought direct insurance there will be no one to help clients make those claims. That may not be so complex for straight death claims, but what about trauma, TPD and especially income protection?
Brisbane-based risk specialist, Tim Ross, has been in touch with riskinfo about the question of the impact of direct insurance on the adviser sector and provided this observation:
… ignore your clients and they will find alternatives
“Advisers who are unconcerned about the direct competition tend to be very clear about their client value proposition and have usually been proactive in marketing that message to their clients. Ultimately that is where the battle is won and lost – ignore your clients and they will find alternatives; show them you care through regular sustained contact and messaging and you will help them make the right decisions about this vital topic.”
The question of double standards was also raised by one adviser, when it comes to regulating direct insurance sales and marketing processes as opposed to ‘advised’ insurance solutions. The adviser called for the direct insurance market to become subject to the same accountability and regulation as the retail advice sector.
Our poll will remain open for another week for you to add your vote and your own thoughts to the question of whether the continuing growth of direct insurance sales represents a threat or an opportunity for advisers and also whether there needs to be an enhanced support network for direct insurance clients at claim time…
My concern is that clients won’t realize they are getting inferior policies until they need to claim and then **** will hit the fan and we will ALL be tarnished
In years to come claims won’t be paid as clients will have purchased the cheaper version & guess what will be splashed across media outlets “Planning Industry a Dud” “Financial Planners have ripped us off again” guess what another Ripoll enquiry, & we all agree these comments should be directed at the TV advertised insurance & not us but we will be there not them so will have further flack again directed at the good guy’s of our wonderful industry. When will regulators wake up, maybe one day prior to the event not in the aftermarth.
Elsewhere in this RiskInfo edition, ASIC is reported as having commissioned research on the proliferation of TV-sold funeral plans. Apparently ASIC feels consumers are acting on emotional needs, are not understanding the products, and may require advice ( no mention of who pays for the advice )
ARE THESE GUYS FOR REAL. DON’T THEY UNDERSTAND THAT THE SAME CRITICISMS THAT CAN BE APPLIED TO DIRECT MARKETED FUNERAL PLANS/INSURANCE SHOULD ALSO APPLY TO LIFE INSURANCE PRODUCTS SOLD IN THE SAME DISTRIBUTION CHANNEL
Idiots who buy dud funeral plans from direct marketing might lose $10,000 or so. The price of a dud ” no pre-existing conditions ” income protection policy for a 40 year old might be in the millions
We need the same research on TV marketed life risk products, and we need it now !!!!
Most People want to do business with an adviser they know and trust. I have been in the Financial planning and Insurance profession for 27 years. Have seen all the fly by nighters come and go. And will see the online companies come and go. However the adviser that still has empathy with his clients for their needs, will continue to make a decent living.Just like they have been able to do for the past 200 years.
Rod’s comments are correct though I hope there will be sufficient Life Companies operating in Australia in 10 years that will have the resources and asset backing to compete with these direct marketing Companies and offer advisers the opportunities to promote quality Life products and be paid commensurate to our experiance, advise and the huge work load in helping clients with claims and administration.
We are expected to know our client and act in their best interest,which over the 25 years I have been a adviser,is what has always been our normal practise and we have been paid sufficiently to cover our rising costs to comply in our heavily regulated Industry.
If clients start to cancel their policies due to the cheap and quick offers being continually thrown at them,this will lead to reducing profits for the existing retail life companies and unless we are allowed to reduce our work loads complying with copious regulations and be able to compete, with easier access to cover for our clients,it will be difficult for all of us and of course the Australian public will suffer in the long term due to short term, ill thought out and outdated ways of many retail Life Companies doing business and a lack of understanding of what motivates people to buy Insurance,which is always price if no adviser is there to explain the difference.
I don’t see them as a threat, people who deal with Direct Companies are just looking for the cheapest premium (unfortunately they are usually 20% dearer)and I won’t deal in the commodity market. If you want to survive going forward position yourself to give good advise and you will survive.
Most Life Companies have a Direct distribution model as well as an IFA one these days. Direct products aren’t perfect but the IFA industry also has its problems.
Direct products are being built to service customers who can’t get insurance through the IFA channel because of underwriting or who prefer to buy online and use underwriting on a direct product. As a consumer I’m looking for a cheap product but one which suits my needs, the trick is how we work out that a product offers value and suits an individual’s need. Direct products are in their infancy and usually more expensive than IFA products but this will change in future as online underwriting improves and the channels grows, attracting the good risks, not just the poor risks who struggle to get an insurance solution elsewhere.
Funeral products are not a rip off. No insurer wants to build a product that causes complaint, degrades the industry or fails to provide value. There are non-underwritten funeral products on the market now that you can buy even if you’re terminally ill, you only need to survive a year and you can receive up to $30k. If you don’t survive you get the premiums back. How is this a rip off? Show me an IFA risk product you’ve been able to sell to someone who is terminally ill.
Attacking the direct market with generalizations will have a negative effect to the IFA industry as well. Work out where the value is in direct, don’t generalize.
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