- Agree (78%)
- Disagree (12%)
- Not sure (10%)
Not for the first time are we asking you to gaze into your crystal ball to predict the future.
In this case, we’re asking you to reflect on our latest report this week of yet another decline in retail advised individual new business levels – and to ask yourself not only how much longer this trend might continue, but how long it will take to climb back to previous levels (see: Lump Sum, IP New Business Sales Continue Decline).
There are a number of different lenses through which we might have framed this question. For example, we might have asked whether you think individual risk new business sales will ever reach new heights. But this is a short-sighted perspective, especially for a country which, relative to so many other regions in the world, has so much upside, and which will undoubtedly experience both economic and population growth in the decades to come.
…almost everyone and everything associated with retail advised life insurance advice in Australia today is doing it tough
In the short-term, however, almost everyone and everything associated with retail advised life insurance advice in Australia today is doing it tough. There are exceptions, of course, but generally speaking, most stakeholders would agree that things have been better.
How long will it take, though, to turn things around? On the presumption – albeit one with which not all Riskinfo readers will agree – that the glass is half full and that retail advised individual life insurance sales will reverse the current downward trend, how long do you think this will take?
Of itself, a decade is a long time. But within another framework, a decade is less than half a generation. However you want to dissect time, however, we’re very keen to learn your position on our latest poll question.
Tell us what you think and we’ll come back to you next week…
Since 2016 the life insurance industry has seen a dramatic drip in new business being written. This correlates with the timing of the Trowbridge report and the implementation with LIF. The 6 key goals for the Trowbridge report which led to the LIF legislation were:
1. Ensure there is trust and confidence in the retail life insurance market
2. Encourage consumers to seek personal life insurance advice, being the best way to purchase insurance if the advice is professional and effective.
3. Achieve the aim of more Australians having appropriate levels of life insurance protection
4. Remove misaligned financial incentives being offered to advisers and licensees;
5. Contribute to the sustainability of advisers businesses and a competitive life insurance industry.
6. Encourage the industry continually to adapt and to become more efficient and productive
LIF and Trowbridge has failed on all 6 goals. LIF has managed to do the opposite of what the 6 goals of Trowbridge report were aiming to do. Underinsurance has increased, less trust and confidence in the retail market, less people seeking professional advice, the rise of boiler room style call centres selling insurance, a much less competitive life insurance market with massive premium increases and IT adoption has been extremely slow compared to other industries.
Within the Trowbridge report there was no analysis of the cost of delivering insurance advice and there was no analysis of the correlation between commissions and poor advice yet the key target within the Trowbridge report and the LIF legislation was the commissions paid to advisers.
Commissions were explored in the research “The influence of commission on product recommendations made by Insurance Agents : William R Cupach and James M . Carson. Journal of Business Ethics 40: 167 -176 2002.” The findings were of a surprise to Cupach and Carson and they were consistent with those of Kurland ( 1995a Ethics, incentives and conflict of interest: A Practical Solution. Journal of business ethics 14. 465-475 ) and (1996a Sales agents and clients: Ethics, incentives and a modified theory of planned behavior, Human relations 49, 51-74.)
The initial research was prompted by the number of law suits against insurance companies and agents where there was a claim that the products recommended were only because of the commissions paid. They found that there was no correlation between the level of commission paid and poor recommendations. What they found was the determining factor was the pressure placed on the agents to sell , the compliance surveillance of the agents and to a lesser extent was the experience of the agents.
In short, commissions paid to advisers were not the issue. It was management driving hard sales and a poor compliance surveillance/ culture as we have seen with recent articles on industry super fund advice to members
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