The Life Insurance Gap survey, commissioned by NobleOak Life and conducted by research group Prueprofile, found that 24 per cent of respondents that had life insurance purchased it directly, while only 3.4 percent of respondents purchased life insurance through an adviser.
“These survey results illustrate the growing trend to buy life insurance directly, outside of superannuation and without advice,” NobleOak chief executive Anthony Brown said.
“It’s appears that more and more clients want to take better control of their finances and save on external commissions.”
In addition, the research also found that only 2 per cent of respondents correctly understood the rate of commission and how it was built into life premiums.
Fifty-one percent believed that advisers received only 10-20 percent of annual premiums, with no up-front commissions.
“Financial advisers are doing it tougher these days, with higher costs associated with compliance and operating their businesses,” Mr Brown said.
“Most financial advisers still choose to receive higher upfront commissions of around 110 per cent of the first year life insurance premium, plus a smaller ongoing annual commission to offset their costs and better manage their cash flow.”
“Most consumers aren’t aware of this commission structure and are surprised with how much distribution costs are factored into an average life policy premium when told. While this commission disclosure is mandatory, it does not appear to be clear to most clients or the public in general.”
Thank you for your comments with respect to the survey. The survey was not intended to undermine financial advisers. The true purpose was to find out what people understood about life insurance and how important it is to them. The title of the survey is “The Life Insurance Gap”. The poor commission awareness was reflective of clients not understanding the high costs associated with advice, especially compliance costs. With respect to our testimonials – they are all legitimate and we post them word for word. We take our responsibilities in this regard very seriously, and ensure we obtain approval before posting any testimonials. They are all from existing clients. Thank you. Anthony – NobleOak
Ah Ethical…love your work. Im sure someone just makes these stories and survey result up to attract eyeballs.
Further to my earlier comment, whilst clients are interested in the cost of cover, the overwhelming majority of my clients tend to be disinterested in how I get paid. They are more interested in professional, specialist advice.
Amongst other things, they are interested in an adviser who is able to recommend the appropriate product for them.
That product may or may not be NobleOak. As a specialist risk adviser I don’t know very much at all about NobleOak products other than that they are reinsured by Hannover Re. They are certainly not covered by any third-party research I use. If NobleOak products are more suitable to an individual client’s needs I would certainly recommend it – the fact that NobleOak offers level commissions only is not an issue.
I am surprised by Anthony Brown’s comments re. commissions.
Clients may not understand them before getting cover but, if they have an adviser, they certainly understand afterwards.
Commission disclosure had been mandatory for long time. I don’t know of any advisers that don’t take it very seriously. Apart from dedicating a section to it in the SOA and then specifically addressing it when presenting to the client I am not sure what more can be done.
As Mr Brown appears to be quite critical of the way in which financial advisers disclose commissions, perhaps he could make some suggestions based on the way in which NobleOak discloses.
Another day another survey….Yawn!! Who is NobelOak Life anyway. Never heard of them. Looks like someone in the direct insurance market wanted a set of results that supported their case and they got it. Short of tattooing a disclosure on the inside of a clients eyelids how much more are advisers to do when it comes to disclosure. You don’t get a lower price deal when you go direct anyway in my experience you just get poor or no advice.
Interesting company Noble Oak.
Particularly the testimonials.
There is no barrister by the name of Isbister registered with any of the Australian bar associations.
A google search was unable to find a Dr Firke or a Dr Preece practicing medicine in Australia.
Google did successfully identify one or two of the others but some were curiously shy.
How about that.
The absolute obession with how much advisers are paid is destroying the importance of clients’ taking advice. The DIYer is then screaming about how miserable the insurer or bank is becuase they aren’t paid or didn’t have enough cover. Australians will always be welfare dependent while this culture persists.
The Direct Life channel serves a purpose in the market, but unfortunately, clients are losing out on the true value of advice. Especially in the area of financial protection of their families and businesses. Many clients I have spoken to with these Direct products are unaware of the serious conditions and exclusions their Direct product comes with. The biggest being exclusions on pre existing conditions. The Direct Life industry will only realize the inappropriateness of their offering when their customers start making claims on their policies. I have also mystery shopped a variety of Direct Life Call Centres, and it is frightening to know that customers’ future financial security is being handled the way it currently is. One example was when I asked the phone consultant about Trauma insurance (knowing full well they don’t provide Trauma), and the response I got was “You mean Terminal Illness? Yes, that’s covered in your life insurance”. Very alarming…
Yawn….commission disclosures take up two to three pages of an SOA these days. Can’t help it if the SOAs keep getting bigger and bigger. Where would you like us to disclose the commission…on the title page now?
Maybe the clients are more focussed on getting advice and appropriate levels of cover. They know their adviser gets paid by the insurer, they most likely couldn’t care about the amount.