{"id":29494,"date":"2015-04-28T09:34:01","date_gmt":"2015-04-27T23:34:01","guid":{"rendered":"https:\/\/riskinfo.com.au\/news\/?p=29494"},"modified":"2015-05-13T06:21:11","modified_gmt":"2015-05-12T20:21:11","slug":"new-business-could-fall-by-40-under-trowbridge","status":"publish","type":"post","link":"https:\/\/riskinfo.com.au\/news\/2015\/04\/28\/new-business-could-fall-by-40-under-trowbridge\/","title":{"rendered":"New Business Could Fall by 40% Under Trowbridge"},"content":{"rendered":"

The Australian life insurance market could suffer a 30-40% loss in new premium income if the Trowbridge Report recommendations are adopted, DEXX&R<\/a> has warned.<\/p>\n

The researcher said that while detailed modelling had yet to be undertaken on the impact of the recommendations, it was likely that individual risk new premium income sourced through the advice channel could significantly reduce.<\/p>\n

According to DEXX&R, the Trowbridge recommendations shift the cost of funding the initial loss incurred on the acquisition of business from the life companies to advisers. Taking into account the substantial increase in capital that each adviser would require to continue writing new business, DEXX&R argued that a 30% to 40% reduction in new business \u201cmay be a significant understatement\u201d of the impact of the recommendations on future new business inflows from the advice channel.<\/p>\n

To illustrate the point, DEXX&R calculated the typical cost of providing personal advice to be around $3,000. This figure includes tasks such as: face to face meetings with a client; completion of the fact find, needs analysis, and research; preparation of recommendations; and the completion of all new business requirements, which may include arranging medicals, statements of financial position and follow up as required.<\/p>\n

…a 30% to 40% reduction in new business may be a significant understatement<\/h6>\n

To recover this $3,000, the average premium per client under the current up-front commission arrangements has to be $2,500. Under the Trowbridge recommendations (which propose level commission of no more than 20%) the average premium per client would need to be $9,000.<\/p>\n

\u201cTo put this into context a $2,500 annual premium would provide $2.6 million in Death and TPD cover for a male 35 year old non-smoking white collar employee,\u201d the researcher said.<\/p>\n

\u201cA $9,000 annual premium would provide $9.5 million in Death and TPD cover, although the maximum standard TPD that could be purchased is currently $5 million.\u201d<\/p>\n

This would also mean that advisers would only be able to cover their current cost of advice if they were selling to the top end of the high net wealth market. DEXX&R believes that servicing the middle income market would only be possible for advisers with access to significant capital resources and the ability to spread recovery of their first year new business costs over an 8 or 9 year period.<\/p>\n

This analysis formed part of DEXX&R\u2019s latest Market Projections Report, which predicted that individual lump sum inforce premiums would increase from $6.1 billion at December 2014 to $15.3 billion by December 2024. Individual disability income inforce premiums are projected to increase from $2.3 billion at December 2014 to $6.0 billion by December 2024.<\/p>\n","protected":false},"excerpt":{"rendered":"

The Australian life insurance market could suffer a 30-40% loss in new premium income if the Trowbridge Report recommendations are adopted, DEXX&R has warned.<\/p>\n","protected":false},"author":7,"featured_media":29532,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[48,8,3,270],"tags":[],"class_list":{"0":"post-29494","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-company-news","8":"category-compliance-regulation","9":"category-general","10":"category-remuneration"},"_links":{"self":[{"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/posts\/29494","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/users\/7"}],"replies":[{"embeddable":true,"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/comments?post=29494"}],"version-history":[{"count":0,"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/posts\/29494\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/media\/29532"}],"wp:attachment":[{"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/media?parent=29494"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/categories?post=29494"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/tags?post=29494"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}