Accountant Referrals Could Help Solve Underinsurance

An increase in risk insurance referrals by accountants will make great in-roads into Australia’s underinsurance gap, one industry expert has advised.

David Phelan

David Phelan

Responding to recent research from the Financial Services Council and MetLife (see: Underinsurance – Apathy the Real Enemy), David Phelan, from Effective Referral Management, said a referral from a trusted source was an excellent solution to overcoming client apathy.

According to Mr Phelan, clients fail to act on their insurance need because they are paralysed by questions like: ‘Where do I go?’, ‘Who do I talk to?’, ‘Where do I start?’, and ‘What level of cover is required?’. But if they receive the answers to these questions from a professional to whom they have been referred by their trusted accountant, Mr Phelan believes clients will be empowered to act.

“There is plenty of evidence that clients look first to their accountant when faced with a financial problem,” Mr Phelan said. “There is usually a lot of trust built up between the two parties, particularly if they have been working together over a number of years.”

There is plenty of evidence that clients look first to their accountant when faced with a financial problem

He said small business owners in particular are likely to have developed a strong, trusted relationship with their accountant, because of the integral role they play in setting up and assisting SME’s to run their business. These are clients financial advisers may not otherwise gain access to, without an introduction from an accountant.

However, Mr Phelan believes accountants need to take a more proactive role in ensuring their clients are adequately protected, and that advisers can and should assist them to deliver this service.

“If accountants proactively refer their clients for risk advice and make sure their total insurance needs are addressed, then this will make great in-roads into the underinsurance disease in Australia.

“Risk insurance is sometimes complex, and this type of advice is very different to accounting or even financial planning advice. Accountants can find it difficult to raise the topic with their clients. They may not recognise the importance of insurance and its role in protecting their clients’ assets.

“It is really up to the adviser, as one half of a strong referral partnership, to educate the accountant on the risk advice process and show them how to introduce it with clients.”

Mr Phelan said risk specialist advisers needed to proactively develop partnerships with accountants.

“In my experience, cold-calling potential referral partners never works. Instead, advisers should look at obtaining a referral of their own, from one of their existing clients who also has a relationship with an accountant.”

The other big mistake advisers commonly make is discussing the accountants’ client base too early in the relationship, and trying to get access to those clients before establishing what they can do for the accountant’s business and gaining a level of trust.

There should be no surprises in the relationship

“The first meeting between prospective referral partners needs to focus on establishing whether there is a cultural alignment between the two businesses. Ask them what their growth plans are, and about their overall business philosophy. Are they truly interested in offering additional services to their clients in a proactive manner?”

The final piece of advice Mr Phelan offered advisers was to develop a robust, disciplined reporting process, so the accountant remains across everything that is being done for their clients.

“There should be no surprises in the relationship. The accountant is transferring the trust they have built up with their client onto another service provider, so they need to be confident that the client’s interests will be put first. It is critical that the adviser keeps the accountant up to date with each and every client that is referred.”

  • I have years of experience dealing with accountants and as they are continually looking into the past at old figures they do not look into the future in case an event occurs so do not refer. I have spent many hours training and eductaing accountants for the odd refereal which are always quality but then they stop as too busy with a 1/4ly BAS or Annual Audit. If only accountants would refer, as all clients would be suitably covered or at least offered suitable cover. In making this statement there are some accountants who embrace risk but the majority choose to ignore.

    • John Paul

      Well said Michael, I agree with you 100%.

  • Mark Thompson

    I should spare David Phelan’s feelings, but I won’t. I’m guessing that he has never worked at the coal face with accountants. What makes sense in theory breaks down in practice. Most accountants treat insurance as tacky, as are the people that offer advice on the topic. We are like bottom feeders who take advantage of people’s fears.

    Recently, I was at a social function and explaining to an accountant how we add back salary packaging, super, depreciation etc. for a client with a low assessable income to increase their insurable income, resulting in a more realistic monthly benefit. His reaction was ‘Won’t that increase premiums?’ God give me strength. This is the world of the accountant. I once had a client’s accountant tell her she didn’t need trauma insurance because the premiums were not tax deductible. Derrr! how do she clear significant debt if diagnosed with cancer?

    There is only so much oxygen in the world and I won’t waste one more molecule of it talking to accountants in the rarefied atmosphere that they dwell in.

  • Laurence Poulter

    Working within a business model that focuses principally on developing effective accountant relationships, we have recently increased our focus on addressing the issue of underinsurance. By building effective relationships with like minded accountants, we have found that they have responded very well to our training and education within this area.

    I have argued in my most recent blog, ‘The Question of Underinsurance & The Right Question to Ask’ (, that one of the key issues in this area is the inability of many clients to place a tangible value on insurance. I think the same is true when it comes to generating accountant referrals. If you can successfully convey the value of such policies to accountants, they in turn will be both more interested and have more success in discussing the issue with their clients.

  • John Paul

    Under insurance is not the responsibility of an accountant to inform, educate and refer. The financial planning industry as a whole has failed the community to Education and more importantly show the importance of personal protection. It amazes me that the FP industry always talks about the trusted accountant, blah blah blah, I can tell your from first hand experience that not all clients trust their accountants. Let’s get together once and for all and educate the public to why you need personal protection, how it works and how it alleviates the pain when a family member falls ill or suffers a major injury.

  • Hey Mark,
    I reckon you must have had a bit of bad luck, as I have an accountant referral partner that gets it, but it didn’t happen overnight. Keep trying for the like minded they are out there or try a service that will gets you infront of the right ones, not the know it all bean counter
    at a Barbie. I have found the younger generation of accountants are often the way to go. Not all are historians and some like to earn more coin from us, while giving a rats. My 2 referral partners doubled our business in a year and I found them via using my mate David, who don’t agree with. Proof is in the pudding but I get your frustration as it is a process that takes time and some will never get it.