New data has revealed a sharp decline in new life insurance policies issued, plummeting from 103,000 in 2018 to just 44,000 in 2023, sparking calls for a rethink of how financial advisers could help enhance product penetration and customer satisfaction.
According to the latest findings from the 2024 Australian Financial Advice Landscape Report, consumer attitudes towards life insurance are mixed. While the majority of Australians acknowledge the importance of having life insurance, nearly half of the population still lacks coverage.
This disparity points to a significant challenge for the industry: why are so many Australians not securing life insurance despite recognising its value?
The Adviser Ratings report highlights financial barriers as a key factor.
Namely, the firm found that while approximately 40 per cent of those without life insurance could afford a policy or financial advice, they remain uninsured. Compounding the issue, over 80 per cent of these individuals also lack a financial adviser, signalling a major opportunity for advisers to tap into this unmet need.
Moreover, the impersonal nature of acquiring insurance through superannuation funds is contributing to a lack of understanding among policyholders, according to Adviser Ratings, with less than one in 10 (8 per cent) policyholders purchasing their life insurance through an adviser, while as many as 62 per cent obtain insurance via their super fund.
Alarmingly, Adviser Ratings said, more than 30 per cent of policyholders are unaware of the specifics of their life insurance coverage.
“Frequent and rich communication from advisers can be a game-changer,” the firm said.
Despite the advice profession’s recent reluctance to offer risk advice, Adviser Ratings suggested that offering differentiated services, such as more personalised and informative client interactions, would help advisers gain market share.
Moreover, the firm said on the supply side, life insurance services are predominantly provided through licensees, however, there is a growing trend of companies with their own AFSL offering life insurance products through dealer-to-dealer service providers or other external groups.
“This shift highlights the need for practices to specialise in life insurance services, providing a more personalised and informed experience for clients,” Adviser Ratings said.
Ultimately, the firm underscored that the Australian life insurance market holds significant potential for growth and development.
“Financial advisers have a considerable opportunity to offer life insurance products that consumers understand and appreciate, addressing the current gap in awareness and personalised service seen with superfunds,” Adviser Ratings said.
“By uniting around a common goal, the life insurance industry and the advice profession can implement strategies and investments that ensure profitability for both advisers and insurers, ultimately benefiting policyholders.”
Over 33 years of providing quality Risk Insurance advice highlighted the paramount importance of having an intricate knowledge of policy definitions and conditions down to the last minute detail on every contract.
To the point of being obsessive with this detail because that is what clients expect of you.
Secondly, what they expect of you is to be able to educate them and explain complex definitions, policy conditions and benefits in a manner in which they can clearly understand and therefore be able to make an important and informed decision about.
The number of clients who would rightly not know the difference between Own or Any Occupation definitions, Agreed Value or Indemnity assessment, Clark Level 3 Cancer definitions, Heart Attack definition, Terminal Illness definition under Life Insurance etc etc etc and the list could go on for days.
The difference a well educated, professional and highly detailed Adviser can bring to the table is immeasurable.
When you are working with professional clients who invariably pay large premium amounts for your expertise, knowledge and commitment, you had better know your stuff backwards and ensure you have the very best quality cover in place on every single occasion because if and/or when a claim arises, it is then that the hard work, research, knowledge and application will most often ensure that the claim is settled and approved with little fuss.
Spend the time at the front end of the business and both the Adviser and the client will benefit from thorough and expected knowledge and process.
For those clients or customers who do it themselves or simply apply online to a product they don’t fully understand, then all the best of luck with that.