Life insurance price comparison websites (PCWs) are providing inadequate information to consumers and often promote price over features, according to research and consultancy group Rice Warner.
Following research into PCWs, Rice Warner stated that while they received similar levels of commission they offered less information and advice on product features, consumer needs and claims compared to a financial adviser.
The group found that while a number of PCWs did compare product features, the main way products were differentiated was on price, and there was insufficient information explaining the differences in features and pricing.
“The inadequate link between price and product features is likely to result in consumers overlooking what is being offered for the price they pay,” Rice Warner stated, adding that without comparing features consumers were likely to purchase products based on brand and price alone.
“The inadequate link between price and product features is likely to result in consumers overlooking what is being offered for the price they pay”
Rice Warner also highlighted that this lack of comparison extended to types of insurance products with PCWs often excluding direct insurance policies that had non-standard features, as well as insurance offered within superannuation funds.
The group stated PCWs also fell short in assisting consumers to calculate their insurance needs and on the level of information related to claims, finding wide variations in the recommendations made and no information on what help consumers would get if they lodged a claim.
“This is a clear disadvantage compared with using a financial adviser who is expected to help their clients through the full cycle of the life insurance policy,” Rice Warner declared.
“Financial advisers will provide their clients with a tailored recommendation for insurance needs which is likely to set a level of cover which better meets the needs of the individual.”
The group added that while the PCW market was new and constantly changing, its main purpose was to replicate the services of an adviser to sell comprehensive life insurance and to generate commissions for the PCW, which were being used by life insurers as an alternative distribution channel.
Perhaps fees should be reduced to 60% in the 1st year and 20% in the second year and subsequent years. If Advisers change their minds about the service offering by PCW’s within the 1st 12 months all fees should be refunded and in the second 12 months 60% of fees should be refunded. ASIC can incorporate this in their review process as well!
Another example of one of the main culprits that causes lapses and churn with no intention of providing Best Interest advice and from the way they are behaving, it appears ASIC has not bothered to see, or investigate this disgraceful behaviour from the PCW market.
It is one set of rules for advisers, which is restrictive and a restriction of trade when you compare what every other policy flogger seems to get away with.
ASIC are going to have to get serious against all direct and PCW policy floggers or they will be seen to be biased against the only advisers who truly represent all Australians, which will not be a good look when the truth finally gets out and the Life Industry starts to self destruct.
i’m done with consumers who purchase the cheapest, be it a hair dryer or insurance. Stuff ’em.
There is some bias in these insights. In an ideal world Rice Warner should disclose if they were selling comparison data to advisers at the time when they shared their views. Anyway, we are just humans after all.
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