There was strong interest this week in our report that all segments of the life insurance sector would benefit from greater collaboration in addressing the current issues stifling the delivery of life insurance advice…
All segments of the life insurance sector can benefit from working together to develop a set of industry-wide solutions to address the current issues stifling the delivery of life insurance advice to Australians.
This call was made by Insurtech firm, LifeBid, within the submission it made to Michelle Levy’s Quality of Advice Review, but which has only been released publicly this week.
Warning that the life insurance advice market is in serious danger of further decline without a combined and united intervention, LifeBid founder and architect, Brett Wright, articulated in his submission a number of the critical issues and thoughts which he says keep many advises awake at night. These include:
- On average, it takes 10-15 hours to help a new client with even basic risk advice needs
- Ongoing service is too manual and clunky
- There is too much complexity, inefficiency and compliance risk across all business functions
- There is no light at the end of the tunnel for advice providers
- Client experience does not live up to 2022 expectations [this submission was made last year]
- Life insurance advice for many advisers, is currently unsustainable and not scalable
Wright says these issues combine to have a cumulative impact on the broader community in that they create an environment in which:
- Life insurance advice is too complex, time consuming and expensive to provide in its current form and needs an end-to-end revolution
- Protecting incomes and families should be growing, but is in decline, to the detriment of consumers and the economy
As he has expressed in previous remarks, Wright says the industry is currently operating like Blockbuster Video, when Australians need and want Netflix.
In addition to his call for the life insurance sector to work more collaboratively across insurers, licensees, advisers and the regulator when it comes to risk advice technology, Wright says the answer, in part, rests in technical and digital innovation, where he says his own end-to-end insurtech proposition – and all similar initiatives – can act as part of the solution.
Wright’s call for greater collaboration across the sector comes as his own offer opened to industry crowdfunding earlier this month (see: LifeBid Crowdfunding Now Open), to enable all industry stakeholders (advisers, licensees and insurers) to be able to have ownership, benefit from and be part of LifeBid’s platform to fix risk advice.
He told Riskinfo he believes one of the fundamental elements required to deliver the life insurance solutions critically needed by Aussie consumers is for any financial adviser who wishes to do so, to be able to profitably grow and scale their risk advice offerings.
Riskinfo readers can click here to review LifeBid’s submission to Michelle Levy’s Quality of Advice Review.
Brett, along with his father Jeremy, are both frequently very much on the money in their prescient comments in industry forums. Great operators both. About the only thing Brett omits in this article is that remuneration, specifically commissions, must rise if the advice industry has any chance of bringing in new people or, indeed, surviving at all.
In addition to Bretts points, specifically time taken to provide advice, the commissions need to be at the level of 100% upfront. Anything less simply will not do and is doomed to fail. Don’t shoot the messenger on this as I’ve left the industry so I’m not saying this out of greed or any misplaced money-grubbing intentions. 60% upfront is an insult to professional advisers, 80% is just treading water but 100% is where there is actually reward for effort. New advisers to the industry won’t make it on anything less AND the renewals still need to stay at 20%. Experienced advisers know in their hearts they are better off somewhere else at anything less than 100%.
Add the time taken to provide advice to the real compliance risk from the twisted system and sub-standard IP product offerings we have and any one can see 100% is the base from which remuneration must start. Then, of course, we have 2 year chargebacks, ever-changing laws, sub standard and inadequate contractual definitions in new policies that can land an adviser in hot water for replacing high-premium legacy policies.
Seriously, look me in the eye and tell me why any self respecting experienced risk specialist would stay in this husk of an industry run by people who have demonstrated often that they don’t understand what advisers OR clients need. Those are the life company execs, politicians, industry so-called ‘councils’, bad jokes like ‘FARCE-IA’ and lawmakers all.
It’s tricky.
Advisers need to adequately compensated for their time and expertise. The commissions have to be worth their time. I would think it is obvious by now the remuneration is inadequate and this needs to be addressed urgently.
However, there needs to be a balance between consumer protection and adviser compensation if the industry is going to be sustainable again. If advisers aren’t incentivised to deal with these products, the industry will decline further and this is not in the best interests of the people who need the cover. If the commission is too high, this can encourage ethical problems for what is motivating advisers’ actions.
The underinsurance problems is only getting worse, which simply leads to increased financial burdens for families and puts further strain on welfare programs.
Unfortunately, Australians are generally unlikely to have the right cover in place unless they meet with a financial adviser. The product will only reach the consumer if it is “sold”, and by sold I mean consumers need to be educated and convinced, and the adviser needs to be compensated fairly.
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