In an email to its partners on Tuesday, Integrity Group Holdings (IGHL) confirmed that its wholly owned subsidiary Integrity Life Australia (ILAL) will no longer be writing new life insurance policies in the retail advised and corporate group insurance channels.
“This has been a very difficult decision,” said Sean McCormack, managing director and chief executive officer.
“The Integrity board and leadership team have been actively reviewing the strategic direction of the Integrity Group and have considered and progressed a range of options. Regrettably, none of these options enabled Integrity Group to remain open to new business.
“Protection of policyholders is critical and as such, the board has taken the difficult decision to close to new business in the retail advised and corporate group channels.”
Mr McCormack said the decision was based on the dwindling number of advisers providing risk advice.
“As you will be aware, the retail advised channel has seen a substantial reduction in the number of financial advisers providing risk advice over the last five years,” the CEO explained.
“The number of lives insured across all channels has also substantially reduced and the market decline means that scale is critical.
“Achieving scale requires significant ongoing investment and we have reached a point where it is not in either the policyholder or shareholder interests to continue to write new retail advised policies.”
Mr McCormack added that given the challenges with the retail channel, the group has also taken the decision to cease quoting for new corporate group insurance business, in order to maintain its capital base for the benefit and protection of existing policyholders.
For the retail advised channel, the changes will take effect from 29 September 2023, while those in the corporate group channel are immediate.
“Please know, this decision has not been taken lightly,” Mr McCormack said.
The Life Insurance Framework (LIF) has been blamed for the shrinking risk advice space, with the Association of Independently Owned Financial Professionals (AIOFP) campaigning for its removal.
Earlier this year, AIOFP executive director Peter Johnston branded LIF “arguably the most destructive consumer legislation ever passed”.
“We believe it was not a case of unintelligent politicians making mistakes but the first stage of a deliberate strategy to remove financial advisers from the consumer relationship,” Mr Johnston said at the time.
He has since argued that the LIF is deterring advisers from writing risk cover.
“Emphatically, LIF has NOT been beneficial to consumers,” he said.
According to Mr Johnston, in order to ensure more advisers return to risk, commission levels need to be lifted to “at least” 80/15 per cent and consumers should be given a “clear choice” between a commission or a fee for service formula.
Peter says, “at least” 80/15 per cent to make adviser write risk. I say it is most definitely 100/20 AND only a 1 year responsibility period. Anything else between here and 2027 will gut the life industry even more than it is – it will be the death knell as anything less is totally incommensurate with the risks and difficulty writing the business in today’s ridiculous compliance regime and litigious domain. Can’t properly grow a practice or start a new one on less than 100/20 in today’s environment.
Last person to leave, please turn the lights out (on risk advice).
“The Life Insurance Framework (LIF) has been blamed for the shrinking risk advice space, with the Association of Independently Owned Financial Professionals (AIOFP) campaigning for its removal.” Insurers were competing to pay commissions in a free market of competition, but the Government’s anti-retail commissions intervened that advantages the dominant multinationals owners of Australian life companies, to impose LIF after introducing the 2017 Industry Funding Levy Legislation on financial advisers that caused the reduction from around 28,000 to 16,000 in 2023, and Treasurer Jim Chalmers is reintroducing it for 2022-23 ASIC’s investigations and enforcements costs, which ASIC and Senator Gallagher refused to disclose to Senator Andrew Bragg, Chair of the Senate Economics Committee. The old saying is “Where there is smoke, there’s fire” of destruction. An actuarial demographic guess is that Australia needs financial advisers to be 1% of population for microprudential effectiveness and efficiency, ie, 260,000 – not 16,000.
Advisers already have the choice of a fee-for-service formula, Pete. It’s not working and here’s a possible solution:
1) Create a short-form PDS say, 3 pages – specifically, what’s covered, what’s not covered and any limitations;
2) Limit the SOA to say, 3 pages – including reasons for the recommended cover, premiums, fee disclosure
3) Lift and standardise commissions. Only pay upfronts on increased business – churn will become redundant.
Easy enough to get a fee for service. You’d surprise yourself – it just takes some thinking outside the box
Really?. With no attached investment advice? Feel free to elaborate. With or without commissions?
Try it. Many have. Nothing worked. Seriously. Fee for risk advice only categorically is a non starter. Wish it wasnt so, but, it most definitely is the case. Sorry, this ship has left.
A small player paying big dollars to attract key executives in a market that had declined without much backing was surely never going to be sustainable. Companies like TAL, AIA and Zurich have large in-force to generate income from and have strong backing from parent companies. Of the newer companies, MetLife surely has substantial backing, they are apparently huge in the US and I suspect globally. I hope all the rest survive, it’s good to have the competition.
Things need to change, claims are increasing, higher lapse rates and very little inflows, scary stuff.
Frydenberg, O’Dwyer, FSC and Life Insurance Companies – How Good is LIF ????
What an absolute disaster, Govt / Pollie & Life Insurers induced.
And who is held responsible for this disaster ??? Never the Govt or Pollies.
I guess the FSC is nearly dead and the Life Co’s are dying.
Lower commissions, harder adviser compliance, claw backs, Adviser exams, it was really only a matter of time. Is this the first of many?
This happened in the UK a few years ago. Commissions were seen as evil. They got rid of the commission then they discovered, without advisers out their selling risk products, suddenly no one had insurance. The UK had to reverse the changes, and now commission rates are higher than they were previously. We only had to look overseas to see what the changes were likely to have and we thought no, that wont happen to us, we know better. Stupid Government.