Our latest poll is effectively asking you to consider the value you deliver in helping your clients with their life, TPD, trauma and income protection insurance claims.
This question is being asked within the context of the ‘commissions versus fees for risk advice’ debate, where NSW adviser, Brett Wright, has made his case this week for the retention of risk commissions (see: The Case for Retaining Commissions).
The fundamental basis of Wright’s argument is that, just as life insurance itself is the pool of many, supporting the unlucky for the benefit of the community, the same principle applies to life insurance commissions serving as a pool of funding which enables advisers to cost-effectively support the many, review their cover and – importantly – help the unlucky to claim on their cover.
we’re …asking how much value you add to the process in supporting your clients
In asking how many hours you and/or your business spend on each life, TPD, trauma and income protection insurance claim, we’re actually asking how much value you add to the process in supporting your clients during this critical moment in their lives.
Naturally, the length of time you and your support team spend on a single claim is determined in part by the product type and the nature and complexity of the claim, but for the purpose of the exercise, we’re looking for your average time per claim.
In his ‘Advised Life Insurance’ paper, Wright suggests life insurance claims take between 10 – 40 hours on average, and he applies an hourly rate of $300 in asserting advisers would need to charge their clients $3,000 to $12,000 if they were charging an appropriate fee for this service under a no commission model. The claim payment would also need to be sufficient to ensure the client could afford the fee, which for a monthly benefit Income Protection claim, is an even larger issue.
Every advice business is different, and you will each have a sense of the average time it takes per claim and also the hourly rate – the value – that you choose to apply to this process. Whatever that number is for your own business, it represents a monetary value that, at least in most other industries, is usually paid by the beneficiary of the service provided.
Wright argues the principle of the pool of life insurance commissions is the right way to go, as this remuneration option removes cost and complexity while at the same time sustains the currently fragile life insurance ecosystem.
Elsewhere in the life insurance industry, we have seen the emergence of specialist claims advocacy services which have their genesis in risk advice businesses and we’re also seeing a proportion of the adviser population either finding a way to charge for their claims support services or who are at least considering this option.
…there remain many advisers who have never charged their clients to help them when making a claim and never will
On the other hand, however, there remain many advisers who have never charged their clients to help them when making a claim and never will, because they consider this fee – this value – is already paid within their pool of life insurance commission payments.
In asking you to identify how much time – and therefore how much value – you provide in delivering your claims services, we’re also asking you to consider the merits of charging for your services under both the commission and fee for service advice models.
Cast your vote, tell us what you think, and we’ll report back next week…