The life insurance industry is on the precipice of one of the biggest changes it has ever seen, and advisers will need to alter the way their businesses operate, Asteron Life’s Mark Vilo has warned.
Speaking to advisers as part of a roadshow series run by the insurer to launch its latest round of product enhancements, Asteron Life’s Executive Manager said advisers needed to prepare themselves for change.
“The objective of John Trowbridge’s report was to make change. It was to disturb, and to challenge the current environment – which is exactly what he has done,” Mr Vilo said.
“At some point in the future there is an expectation that this industry could end up as fee for service.”
He acknowledged that advisers were concerned about the remuneration model proposed in the Trowbridge Report, and said he had received numerous questions from advisers about how the model was calculated and where the various numbers had come from.
At some point in the future there is an expectation that this industry could end up as fee for service
“Advisers are asking us: ‘What does it [Trowbridge] mean for my business? So in response, we created the Asteron Life Remuneration Modeller.”
The Modeller enables advisers to assess the impact on their businesses if the Trowbridge remuneration recommendations are implemented.
Using information such as how much new business the adviser is currently writing, how many new clients are seen annually, the amount of inforce premium the business currently has, and the remuneration model currently used, the Modeller compares what the business looks like now, against what it would like under an alternative remuneration model.
“This will help you make decisions, even if they’re small ones, that will help your business in the long term,” Mr Vilo said.
Mr Vilo did not confirm whether Asteron Life was in favour of the remuneration model proposed in the final Trowbridge Report, but told advisers that the insurer was investigating a wholesale-style product, with the flexibility to dial up commission to any level the adviser wished.
“If you’re thinking about the way products have evolved over time, our view… is that we need to question and challenge whether or not they are the way of the future. One of the things we put forward [in Asteron Life’s response to the Trowbridge Interim Report] was the idea of having a form of ‘naked’ or wholesale pricing.
“You, the adviser, could then act as a wholesaler, and dial up your remuneration to whichever rate you felt was appropriate – be it nothing, right up to 100% of the sum insured, or beyond.
“It’s an idea, and it’s something we’d like to explore with you as to whether we should pursue it.”
Mr Vilo added that he expected there to be some clarity on the future of the insurance sector very soon, with the Financial Services Council (FSC) likely to release its response to the Trowbridge Report to the Assistant Treasurer this week.
“We need to get some certainty so we can start to move forward,” he said.
To access the Asteron Life Remuneration Modeller, please contact your Asteron Life BDM. For more information on the Asteron Life product upgrade, click here.
very strange article, I am afraid the author should try and get in front of some clients to assess the feedback. If we act as a wholesaler in this, then the cost, if i believe correctly, of the insurance is dialled up to include our fee, this will produce a bidding war.
The client will go for the lowest cost he can get, more than likely an online direct product.
Naked product will, i feel, not work in this model.
If the client ends up going for a direct product instead, then I think Asteron’s parent (Suncorp) will regard that as an excellent outcome. Direct products have much lower claims costs because there are so many built in exclusions that a non advised client never reads or understands.
I don’t think it’s any coincidence that the advised product part of Suncorp (Asteron) is progressively reducing its product benefits, service levels, and adviser remuneration, while other parts of Suncorp (such as AAMI) are investing heavily in expanding their direct life business.
It’s a trend that is emerging with many of the Trowbridge report collaborators. Advisers will wear the pain in the short term, but the most pain will ultimately be felt by consumers whose claims are rejected because of the built in exclusions in their direct product.
You know, If we had some fair-dinkum, sleeves rolled up, type of Life Company execs around these days they would be chomping at the bit asking advisers to take them out to the coalface and sit with advisers to get some experience in client attitudes during planning appointments – risk appointments I’m talking about. That would open their eyes and hopefully get them thinking about uniting with other insurers to fix this Trowbridge problem.
I think a bit of executive time on the ground would work miracles. my God, it would get them out of their offices at least. 30 years I’ve been writing risk business and I’ve only ever had one executive from a life company come to my office! Go figure . . .
Unpaid employees!
Does anyone else get the feeling that we are being left “naked” out in the cold?
What recourse do advisers have to charge the Life Offices for their inefficiencies which is one of the contributing factors to this whole mess?
If the costings have been so inappropriate for all these years why have the Actuaries retained their positions?
The solution to this “problem” is that Life Offices should increase all “in force” renewal commissions to 30%. For 12 months a Hybrid system (80/20) can apply to advisers with 5 or more years experience. For those with less than 5 years experience the Hybrid transition should be say 3 – 5 years.
This will come at a considerable short term cost to the L/O’s but they are the ones driving the change.
If the figures I have been told by the L/O’s are in any way accurate if the Trowbridge recommendations (20/20) are implemented we will have NO Industry left.
Let’s use some 20/20 vision to see a positive outcome to this issue.
If you dial down the commission to “nil” at present on life office quote systems it reduces the initial and ongoing premium cost by between 18% and 25%.
If the time spent advising a given client and implementing their risk cover required a 50% mark up, how is this in the client’s best interest? The first year cost would effectively be around 25% to 30% dearer than simply leaving it as is and taking hybrid commission to cover your initial costs.
@ Roger Smith and others.
You are correct in your commentaries.
The Life companies since the introduction of FSR in 2000 have abrogated their responsibilities to advisers and the consumer.
They are not interested in advisers supplying them with clients now with the advent of “no advice” online access.
If anyone believes otherwise, then look at how business is done today. Administration is supposed to be more streamline but experienced people in that area as far as life companies is concerned, has never been more barren.
Who decided that an underwriter with 2 years experience was now a senior underwriter. In days gone by that underwriter would still have training wheels on…. and perhaps that also part of the problem
I can think of no other way to kill off an industry.
What is needed is one decent Life Company to stand up and be counted, show, some intestinal fortitude, who knows, they just might put the rest of them who are accepting these changes out of business.
Perhaps the regulators should legislate a set of generic risk products and then establish an advisory service that is funded via their proposed mechanism to advise clients on types and levels of required insurance and then see if they can cover their costs? We can then ask them how they’re going from time-to-time. If they cannot break even then they can butt out. We can also hassle them from time-to-time about the diminishing take-up of personal insurances across Australia leading to increasing reliance on our social security system. Sounds like an idea to me.
I know Mark Vilo and have a lot of respect for him however I think he is way off target to suggest personal risk insurance clients will entertain paying a fee on top of a premium. Clients, generally, are not aware of the postulations of FOFA and Trowbridge and really don’t want to know or care. They see a premium as a premium and will NOT relate to paying a fee too. I’m talking about the great unwashed here – the middle demographic not HNW individuals who will have their insurance wrapped up in the fee for financial planning full scale advice.
Me? I really don’t have a dog in this fight as my existing renewals provide plenty of income and new business is simply an adjunct as I do hybrid anyway. No, I am speaking out here for the new advisers entering the game as I see suggestions such as Mark Vilo’s as potentially very damaging to our industry. Saying things like a fee based system is “likely” does nothing to rally advisers to push for a united front saying they want what AMP has suggested, or 30% level or whatever – anything is better than a fee system for insurance which will NOT work. The amount of time, money and stress new inductees will have to go through to enter an industry and then to find their income prospects are grim due to an ill-conceived fee system really angers me. Not for me but for those advisers at the ‘other end’ of their career just starting.
I would encourage all advisers to link arms and support the quick initiative shown by AMP and some independent dealerships suggesting a good hybrid system and THEN have the life offices scoop up the churners (we know where you are!) and get them out and most of our issues will be fixed. Please Mark, get rid of the churners instead of navel gazing in a room of advisers who will only give you the answers you want to hear. Risk fees WON’T work or help, churners need LIFE OFFICE ACTION – these are the two things I’m giving you today with my 3 cents and 30 years at the coal face. Be on the front foot like AMP, God luv ’em. Life companies need to scoop up the churners and toss them out for good. Issue solved. Life companies, please listen for a change.
I find it interesting that whenever one of the Life Office’s exec starts spouting about the inevitable changes ahead for the “Life Insurance Industry” they never actually involve anyone changing except Advisers.
Asteron has made their position on commissions very clear for the past couple of years – and they definitely don’t support advisers.
I don’t even know who my BDM is these days, since my last resigned from the company. Just shows how much they’re willing to invest in advisers.
And this would be why I no longer write any business from them.
Does anyone else feel like we the advisors are fighting this ridiculous Trowbridge recommendation our own? And to me it’sike swimming against the current we just are not getting anywhere
Not once have I seen an insurer really stand up and truley support us Sure we have had the usual ” lip service” but the facts are the real winners in this will be them The consumer will not get any reduction in premiums even though the initial outlay by the insurer has reduced dramatically FOS complaints ex cellarate as irate clients purchase inferior or wrong products from policy flogging on line insurers who still hide behind the GENERAL ADVICE warning
And the under insurance issue blows out to cripple the soci security system All in the name of a better bottom line
What a mess has been created through greed and lack of experience and understanding of our industry by meddling buearocrats
One last thing who will do the work of assisting clients with claims and the many other things we as advisers have done for many years for free
I can hardley wait to se what the FSC come up with no doubt a 100%!agreement with Trowbridge wait and see!!
Asteron have at least had the decency to let us know their thoughts. Unfortunately the real life implications of an “expectation that this industry could end up as fee for service” will be the complete disintegration of quality life products, service, claims, profits, tens of thousands of jobs and loyalty.
The retail Life Industry will fold and we will end up with people changing policies every year to get the cheapest deal via stupid Coles car advertising strategies, catering to the brave new world of, “we guarantee to be cheaper than anyone else,” with the result of massive yearly lapses.
If John Trowbridge’s aim was to disturb and challenge, he has succeeded, though his remedy is to create chaos.
With Asteron considering a naked or wholesale pricing model, does not take into consideration the inefficiencies with the full spectrum of services the Insurance Companies provide, that requires many hours of advisers and their staff to fix manually.
How do you price that and how do you think a client will react if we present an invoice for hundreds or thousands of dollars based on time we spent because the Life Insurer cannot provide a quicker, more efficient service to help us advise clients to purchase, administer and alter life policies.
Mark said he expects there to be some clarity on the future of the insurance sector with the FSC response.
Based on what they have come up with so far, we may need divine intervention.
Most of these hob knobs have never sat with a client and sold an Life Risk Product! Obviously….
*%#! Them.
I have not used Asteron for some time.
hem after hearing about Sun Corp raiding it for cash to pay it’s last flood claims late last year, maybe Asteron has been left damaged and Mark Vilo is tramping out the company line from above.Maybe it has been left with minimum reserves and would be in a difficult position paying for new business.
Then as stated ABOVE by some one , Suncorp will be there hoping to pick up the on line stuff that defaults from our good advice.
I think the following quotes from Forrest Gump sum this whole Trowbridge business up:
“Stupid is as stupid does”
“My momma always said, “Life was like a box of chocolates. You never know what you’re gonna get next.”
“I’m pretty tired… I think I’ll go home now”
Unfortunately, the third quote is probably the most poignant ! This industry is going to be devoid of all the experience, caring and empathy which is so badly needed to look after the wellbeing of Australians Insurance needs!
Hi Guys
I agree with most comments here. I certainly don`t know who my Asteron BDM is either. I`m thinking that we are in some real trouble here. I`m lucky as I have had 25 years in this Business and have strong renewal commission to support my business going forward. I`ve certainly built this Business without a great deal of help from any of the major Insurers so I suppose I will just have to keep doing that.
I would like to see like everyone else if there is just one decent Insurance Company who is prepared to stand up for us. Otherwise I may look at writing AFA(Australian Family Insurance) products. 20% upfront,20% ongoing,no SOA`s, no fact finds,no file notes, no bull!!.
Mark Vilo, please read the comments above and go back and read the comments that have been stated by risk advisers in past publications – clients will NOT pay an insurance premium AND a fee to their risk adviser. This has been stated time and time again!
So where on earth do you get the idea that there is an “expectation” that this industry could end up as a fee for service? Not from Risk writers!
My fellow advisers there is a simple solution to all of this,we can cease being self employed and become employed by the Life Companies and be paid like BDM’s. Then they would not have to pay commission at all.
Think of all the benefits we would have with no business overheads, no staff, a 9 to 5 job, 4 weeks annual leave , leave loading.,sick leave, no need for a car we can take the bus to work, no early morning late night or weekend appointments and no stress. Clients will line up at the door wanting to buy insurance. Hang on, I’m starting to sound as silly as Trowbridge and CO.
The point is Life Companies need advisers like us to sustain an industry that has survived through all kinds of change and needs to keep surviving for the good of the Australian community. But we need a commission system that will sustain us as well.
Reg, I was feeling all warm and fuzzy about being a ‘kept’ employee there for a second or two. Then I snapped out of it. At least we’d get a wage and wouldn’t have to worry about 3 year chargebacks! Oh and maybe executive bonuses too! Well worded Reg – good on ya!
To quote Stephen King “The Titanic is about to sink — and there aren’t any lifeboats”
If Trowbridge or anything like it is implemented the IFA community will wither on the vine.
That will mean insurers will chase opportunities in direct and group products.
There the only way to increase profit in a price driven market is to reduce the manufactured cost of the product.
The only way to do that is reduce your reinsurance costs by constraining the conditions on when a claim can be made, and only tell the consumer in very fine print.
In group insurance you do not even have to tell them you announce the change after it is implemented.
Just recently all Australian Super Income Protection customers had the definition of disability changed from unable to perform “one” duty to “any” duty and they were notified after the event.
We all know the implication of one word is to turn a claimable policy to an un claimable one.
But the consumer doesn’t until, having sued for what seemed a legitimate claim, is told by the judge I find for the insurer and award costs against the complainant but note that the terms of his policy was unconscionable.
Someone will have to explain to him that means you are the victim of a gross fraud and it was all perfectly legal.
If the Trowbridge remuneration scheme doesn’t kill you try explaining to a cynical public who have just seen a 60 minutes expose about how insurance doesn’t pay out that we are the good guys, our policies are guaranteed renewable they cannot change without notice, we paid out $5bn in claims in 2013.
If we go to the politicians complaining about commission we look like self interested spivs as in ABC’s Mad As Hell.
If we go to the politicians about competition and how the legislation they put in in 2000 has worked but all of those gains are under threat. Do you want to go back to the 1990’s and tied agents? No? Well let the IFA’s keep the insurers honest and reward competitive companies with recommendations. All you need to do to ensure that is confirm Hybrid and level commissions and beat your chest while Banning upfront. WIN WIN!!
Why doesn’t someone who has gone FFS just come out and show us what a successful pricing model looks like and let us see if it’s possible. The reality is we don’t know what any of the alternatives truly look like.
Gav, It doesn’t exist – that’s why they won’t ‘put up’ and show it to us instead of ‘shutting up’.
Just more proof that it is the Life Offices driving this change. We, the Advisers and our staff, do most of their work for them (times have really changed) and now they want us to do it for little or no remuneration. It sounds just like most of the Law Firms “No Win – No Fee”. A one way path to Boot Hill for our Industry.
Smithy, I don’t think the MCG will be bigger enough to hold an adviser rally
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