In its latest edition of the Adviser Musical Chairs Report, Adviser Ratings found that just 480 advisers were responsible for writing half of the new business during 2023.
The reason for this, according to Adviser Ratings, is the Life Insurance Framework heavily reducing most advisers’ engagement in the life insurance space.
“However, a small proportion of high-performing advisers have responded by capturing a much higher share of the available new business,” the report said.
“To showcase the effect on advisers, we divided them into four segments: A, B, C, and D, based on how much new business they wrote in the preceding six months. Each segment represents a quarter of new business written, sorted by total amount per adviser. Segment A wrote the most per adviser, while segment D wrote the least. We then analysed how these groups changed over time.”
The top segment was made up of just 118 advisers, who wrote around $190,000 in new life business on average. Segment B, comprised of 362 advisers, sat closer to $60,000 in new business per adviser.
“The high-performing advisers in segment A are now writing more risk than they did in 2020, before commissions were heavily capped,” the report said.
“At the other end of the scale, segments C and D (820 and 5,099 advisers, respectively) are still participating in the market, but wrote very little in risk volume over the six-month period.”
In September 2023, Adviser Ratings reported that half of all life policies were written by 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.
While the top end number has shrunk, the number of advisers writing life policies has grown slightly to 6,399.
According to Adviser Ratings, the life insurance sector is continuing to experience greater demand than advisers can service.
“The life insurance industry has been under strain for some years, and that has a number of implications, including an ongoing and widespread underinsurance issue. Last year, lapse rates jumped, as consumers contended with the rising cost of living and premium increases. It’s an undesirable scenario for insurers, advisers, and consumers,” the report said.
“Our research shows that advisers have capped out on the level of servicing they can do for risk clients, against the reality that the demand for life insurance remains strong but is not converting due to higher premiums, and individual advisers’ willingness or ability to service the clients, or the cost to place business.”
The industry and government, the research firm added, need to implement incentives for brokers and advisers to collaborate or direct incentives for customers, ensuring that consumers are “guided towards more effective and reliable insurance options that offer better value and protection”.
“The industry needs to not only overcome the immediate legacy pricing, pre-assessment, underwriting and operational issues, but become more creative in developing the psychological imperative for life insurance,” the report said.
“Most people need life insurance as one of their first financial products and it is a great runway for people to move into longer term financial advice as their needs change and evolve over time.
“This creates the ongoing and long-term economic uplift of introducing people to financial advice when they’re young; engagement with financial advice as a sector (even via other referral mechanisms or aligned industries) can improve over the long term through a strong, robust, profitable life insurance sector.”
I wonder how much of the new business being written is switching from older generation IP products to the “post APRA intervention” IP products which are a bit cheaper and much nastier.
I could easily write lots of new business if I did that with my clients who have older IP policies and are feeling the pinch from rising premiums. But it would rarely be in the client’s best interest, and would be a huge compliance risk.
I suspect there may be some advisers who are responding to strong consumer demand for cheaper IP policies by glossing over the limitations of new generation IP products and the benefits lost in switching.
” The available new business” – You obviously don’t know much about the life insurance industry. The available new business to write in Australia has never been even closely written in any year.
Ted Carroll
who has time to write new business when you spend all your time making policy alterations for existing clients due to the insurers price gouging each year.
Approx 12 years ago, i placed a reasonably large case for directors of a professional services medical practice.
This came through a referral from their Accountant.
The case took approx 8 months and 100’s and 100’s of hours to place the cover including significant gathering of financial & legal data, several interstate flights for meetings, strategy discussion, recommendations, pricing models and alternative options etc etc.
The Underwriting & assessment process was exhaustive and comprehensive.
During the 8 months of work I charged no fees whatsoever.
When the cases finally completed, I decided to elect to be paid the upfront commission payment of approx $68,000.
The reason I chose this option is that I had an inkling that there were unsettled individuals within the practice and I forecast there may well be a breakdown of business structure in the next 3-4 years or so.
Sure enough, after 3 years this had actually eventuated and all the insurance cover placed was cancelled by all directors as the business structure had dissolved.
The commission amount I was paid was exactly equivalent to the same amount a Real Estate agent would receive if they sold one property in Sydney for $3Mill and charged commission of 2.30%.
The Real Estate Agent could have sold the property in a week and showed 3 people through it, or potentially none !!!!
The life Insurance business has been destroyed and manipulated by those who don’t know, don’t understand and don’t care.
It has been a catastrophic failure of legislative mismanagement driven by political cowardice and self interest groups.
Nothing will change until the commission rates return to a min of 100% Upfront and 20% Ongoing.
Until then it will continue to fail and fail the Australian public.
Maybe they needs to take a leaf from the Medical profession, where they have an ‘authorised prescriber’ status for certain doctors to be able to prescribe certain drugs to patients without applying for TGA approval constantly. There are plenty of risk advisers who know their stuff and could write a lot more risk, especially for lower premium clients, without all the compliance hurdles and inefficiencies. So those advisers with appropriate skills, education, experience and possibly a tested against knowledge criteria or extra risk based (specialist) qualification should have more freedom. The insurance industry needs people writing more application for insurance to build the insured pool, so we must find ways to make it happen and if compliance is a major hurdle, then allow those with the skills to do it.
“The industry needs……………….to become more creative in developing the psychological imperative for life insurance,” the report said. Complete and utter hogwash. Force a 40% pay cut on any profession whilst tripling the compliance workload and see how that works out. Government, Insurers and Lobby Groups created this quagmire, not advisers. Most advisers don’t write risk insurance because it is commercially unviable.
Absolutely nailed it.