Speaking at the Adviser Innovation Summit in Sydney on Tuesday, Risk Hub founder Marc Fabris said research his firm conducted showed that many advisers want to increase the amount of risk advice they write, even with falling commissions severely dropping the number currently providing the service.
“There’s absolutely a positive upside to [risk advice] despite the challenges, despite the fact that we know we’d like to see commission back up to a more reasonable level. But advisers do want to actually get back into it,” said Fabris.
“We found 43 per cent of advisers, despite the challenges, do want to grow their risk. This is across the board from those not writing risks to writing a reasonable amount of risk. So, it was a good proportion.
“I’ve found it quite comforting that there was some positivity, but equally, yes, around 46 per cent said we need help with processes. Clearly the equation is slightly wrong, or more than slightly, so we need to improve efficiencies.”
Michael Pillemer, chief executive at PPS Mutual, also speaking at the event, added that advisers need to be taking their clients’ risk needs into account.
“It’s important for advisers to be able to deal with risk. It’s really incumbent on advisers, whether they specialise in risk or not, to make sure that when they’re sitting in front of a client that they deal adequately with the clients’ needs. I think that’s a very important point,” Pillemer said.
Fabris explained that it’s not just commission levels that are causing the problems in the insurance space, highlighting that poor practices are leading to tumbling retention rates.
“Bottom line is, we’d like, first of all, for insurers to get all things right. That’s that’d be nice as a start, because parts of the process obviously aren’t great,” he explained.
“There are probably a couple things I’d say, like not upfront discounting, this grab for new business. I’ll hear insurers say that advisers want these upfront discounts. No, they bloody don’t.
“What happens is you put them out and when the options are in front of you, it’s very hard to at times explain to the client that they are better off with a longer-term averaged result on the premium.
“It’s not great for the industry. It’s not great for retention to have a client with a premium going through the roof year two, three, four.”
Pillemer added that insurers also need to be improving the quality of their advice tools in order to ease the process for advisers.
“This is something that insurers need to do better. I’ve been quite vocal in the industry and the media about the need for insurers to manage the quality of their advice tools better because unless they do that, then we’re going to continue to see the spiralling premium increases, which is not good for anybody in the market,” he said.
“Higher premiums mean higher lapses. Higher lapses mean deteriorating claims experience because of good lives that are leaving the pool. When you have higher lapses that leads to worsening profit share for insurers, which requires them then to jack the prices up again. So it becomes a vicious cycle, and this is a really important issue that the industry needs to address.”
Insurance is a grudge purchase….much like buying tyres for your car. People don’t buy insurance willingly. They are “sold” insurance by being “sold” the fear of the risk factor.
The LIF reforms handed advisers a 40% pay cut and a tripling of compliance so most advisers simply stopped delivering risk advice because it became commercially unfeasible. If advisers were to be fairly remunerated for the work they do, they would willingly do the work again. Just a thought……..how many Lawyers, Accountants , Doctors, Dentists, Engineers, Bricklayers, Carpenters or Bakers would remain standing if a 40% pay cut was forced upon them by Government? Perhaps give that a thought.
Also incumbent for insurers to pay advisers more or no chance Marc…