According to research firm CoreData’s Future of Advice report, commission levels are not at the top of the list for what would need to change in order for those that currently don’t write much risk to start writing more.
Speaking with ifa, CoreData chief executive Dean Thomas explained that the research firm is seeing a continuing trend of fewer advisers providing risk advice, with the report finding that 75 per cent of advisers write 20 policies or less per year.
“The reason for that is, let’s be very clear: a lot of the holistic advice writers, or the advice writers, are moving away from insurance,” Thomas said.
“Interestingly, when you ask them what changes would need to be made for them to write more insurance, very little of that cohort talks about changes to commissions. I think the horse is bolted in relation to that.
“It’s not a commission component, per se. It’s the time it’s taking to be able to write insurance, go through the underwriting rules, have the knowledge around the complexity of some of the insurance policies, the views of where they are today, what would need to be made tomorrow, the extensive levels of underwriting that’s needed. You’re seeing advisers basically saying it’s too difficult for us to do that.”
If the insurance industry wants the numbers here to change, he said, there needs to be a greater focus on the areas that advisers highlighted in the survey.
Namely, 63 per cent of respondents identified underwriting rules as a barrier to writing more risk, 42 per cent want simpler product design, 41 per cent want quicker policy approval, and 37 per cent want better software integration.
On the other hand, just 11 per cent noted higher commissions as an area they want improved, while just 3 per cent said there were cost-related barriers.
“There are two things occurring,” Thomas said.
“They’re either only writing it if they see it as an absolute desperate need, and they really need to keep the client happy. That’s why there’s low level of insurance being written. Or what we are seeing more and more is extensive referral arrangements to specialist risk writers out there in the marketplace.
He added: “Traditional advisers find it too much to learn, takes too long, and they don’t want to disturb that relationship. So, they’re outsourcing to specialist writers.”
Another challenge for the risk advice sector, Thomas said, is the danger that advisers retiring poses to the specialist risk market.
“That specialist writing market is very, very small, and what happens when they start to exit the market? A lot of those people are your old, traditional risk writers, so they can be a little bit older,” he said.
“We’re not seeing a whole range of people coming into the market saying, ‘You know what, I’m going to put my hand up, I’m starting my career in advice, and I’m just going to do risk advice’. We’re seeing that that supply really starting to contract extensively.”
Last year, Adviser Ratings found that half of all life policies were written by just 493 advisers in the six months to 30 June 2023. The other 50 per cent were written by 5,880 advisers, taking the total pool of advisers that wrote life policies to 6,373.
“The retail life industry is currently surviving on a small cohort of advisers to bring in new business,” Adviser Ratings said at the time.
Sure us Risk Advisers are up against it. We have our process streamlined and this all comes with years of experience. You need to know what you are doing, have great relationships with your Underwriters, have the art of asking very personal questions of your client even before you start as you need to know what you are dealing with. The medication, pastimes, recreational drug use all need to be taken into consideration. I have had many clients declined cover due to a one off Cocaine binge on a weekend away, what surprised me though is that they actually declared it. You also need to be able to walk away from some clients as you may realise that they do not value what you are offering, sometimes it is like herding cats.
My philosophy with risk is very important, its no use providing all these investment, superannuation and retirement strategies if risk is not considered, because we all know that if their health fails them, the best laid plans fall over when someone gets that unexpected curve ball.
Risk insurance is like your house foundations, get it sorted and stable so that everything else can work from there.
Everyone with power and influence wants to kill off advised insurance. They don’t really care if it happens through process complexity, excessive compliance, or insufficient remuneration. They want to increase the barriers to insurance advice, not lower them.
The activists that control consumer associations want to kill advised insurance because they believe all advisers are bad and all commissions are bad. Labor is aligned with the activists.
Insurers want to kill advised insurance because they believe they can sell junk insurance directly to naive consumers. Liberal is aligned the insurers.
The decline of insurance advice is being driven by an unholy alliance of powerful forces that advisers cannot withstand. Insurance advice will soon be dead.
I find it hard to believe that increasing premiums aren’t the main reason for less risk being written
When you get 30% increases in level premiums, it’s very hard to justify to yourself let alone clients to continue cover.
Take into account discounting new business and upping premiums on existing clients, its not a attractive proposition for anyone.
Untill risk is priced sustainably, many will stay away
A Real Estate agent can sell a house to a 40 year old valued at $3mill in 7 days in Sydney and generate nearly $60,000 in commission.
A Financial Adviser placing the $3mill of Life Insurance on that 40 year old in order to protect the resulting debt may
have a process that takes several appointments and significant time running comparisons and documentation plus medical reports, discussions with Underwriters, etc.
This may take up to 3-5 weeks before the cover can be secured and the annual premium for a 40 year old male non smoker may be $1600.00.
At 60% commission, this equates to $960.00.
Why would anyone bother to provide this advice for this level of remuneration ?
When LIF was proposed the change in commission was to happen in conjunction with a reduction in the complexity of risk advice, including compliance. At a guess I would say that the time taken to write a risk policy using personal advice has increased by at least 50% and that assumes a clean skin from an underwriting perspective. I have had one client in the past 3 years that has no medical issues, which means that every other client has had a time increase of probably 100% on the pre LIF position.
The Risk Insurance business is a very highly personal business.
When you are working with clients in regard to their financial base, it requires a high element of respect and trust for that client to allow you to advise them.
When it comes to working with clients regarding financial protection strategies and the placement of quality insurance, the client not only needs to bare their soul regarding their financial position, but they then need to give you everything they have of themselves from a health, personal and medical perspective.
They must tell their risk adviser details they would often not disclose to their family, friends and sometimes, even their partner.
The level of trust in this process is something those who don’t really understand the importance and gravity of risk insurance advice cannot truly appreciate.
In addition, the relationship that exists between Underwriters and Risk Advisers is also one based on trust.
Good Risk Insurance Advisers know they can discuss issues with Underwriters on a trust level when the Underwriters know the adviser has an intimate and detailed knowledge of their client of whom they have never and most likely, will never meet.
This is important.
The value a high quality Risk Adviser can deliver to an individual, family, estate or business when unforeseen circumstances arise is immeasurable.
And…for all those reasons, it is only fair and right that value is recognised in the level of remuneration that is received in relation to the responsibility and trust that is present.
Here is the reality of what the government, the insurers and other interest groups have created via LIF and other mediums targeting advisers:-
1/. a 40% pay cut handed to advisers rendering risk advice largely commercially unviable
2/. quadruple compliance work and longer advice documents which clients don’t read nor understand
3/. advisers can no longer afford to support lower income / lower premium paying clients (focus on the wealthy)
4/. less risk insurance gets written as advisers refocus to more commercially viable avenues of advice (i.e. (focus on the wealthy)
5/. insurers jack up the premiums to remain viable
6/. people cancel insurance policies due to massive premium increases
7/. insurers jack up premiums further to cover for cancelled policies
8/. more people cancel policies due to affordability…….and so on, and so on
QUESTION…..why is it that Lawyers, Politicians and Government Bureaucrats who don’t understand the intricacies of how Financial Planning operates, determine how the Financial Planning profession should operate? Do Lawyers, Politicians and Government Bureaucrats decide how mechanics are to fix cars or how Dentists are to do a fillings? The industry is in crisis
The horse has been bolting for about 7 years!
A lot of the time is spent gathering comparison quotes, completing overly long SoA’s, and the fulfilling the safe harbour steps. The whole process is convoluted.
The trouble is, politicians and consumer groups just think its about the adviser maximising commissions, conflicts of interest, and filling in an application to be paid.
In the words of a leading Compliance expert, “any Adviser writing risk with ASIC enforcing the current legislation in place has rocks in their heads” Miss documenting that discussion about G’tee Renewable and you’re in jail. Multiple that variable by 20 other variables and you’re on your way to failing an audit. The problem is red tape and bad legislation, not commissions.
Dean you would make a great spin doctor! The people you asked about brokerage levels not being an issue are clearly not the right people…
Don’t worry Mr Jones is on his way with quick wins to make advice, including risk advice, more affordable and accessible. He will have a solution some time in 2034, long after the last risk specialist adviser has left the building.
When the horse has bolted, you need to catch the horse, turn it around and put it back in the stable.
To say the level of remuneration paid does not have a great impact on the incentive or volume of risk insurance being placed is looking for other reasons not to address the ” horse in the room ” and that is the level of remuneration must reflect the hours, knowledge and process it takes to place high quality, high premium risk insurance business.
Yes, it’s complicated, specialised and very often long-winded in regard to the process.
That’s why the remuneration basis needs to be reflective of those skills.
That’s why the commission levels need to return to a bare minimum of 100% Upfront, a 20% Renewal basis and a 1 year sliding scale pro-rata responsibility period.
If this doesn’t happen and happen quickly, the Risk Insurance business is on a hiding to nowhere and extinction.
Absolutely 100% correct. Nail on the head ‘Ropeable’.
Why would an insurer pay you 100% upfront and 20% ongoing with a 1 year pro-rata responsibility period? They need to make money as well. Changing the compliance regime is the only answer
i agree with you. Its not going back to 100.
80 and 17-18% could work though for me
Charge a fee
probably the only article ive read of late that is factual. every other article is biased information being peddalled by people with vested interests.
Either way you spin it the industry is now in crisis. Why do more work for less money.