TAL’s insurance cancellation findings show customers are stopping their “living insurance” policies 1.5 years before the average claim is made, discontinuing at the average age of 45 years and claiming at 46.5 years.
Speaking to ifa, Affinia general manager Craig Parker said the findings indicate a “major impact” on the cost for financial advisers on two levels.
“It is an impact on the cost of the advice that is being supplied and the strategy and plans that have been put in place for the client over that period of time, but also it has an impact [on] the continual growth of the adviser’s practice,” he said.
“I think the key thing is we are going through, from the industry point of view, a fundamental shift of insurance being a product that is being sold to a solution where true advice comes into play,” he added.
Mr Parker believes advisers can combat the problem of premature cancellation with “ongoing education, ongoing communication with clients… and the ongoing review of a client’s needs”.
“In simple terms, the advice that I am supplied today is going to be different from the advice I am supplied in a year’s time or five years’ time because my personal circumstances change,” he said.
“That is where a clear review process needs to be in a place and a clear communication plan has to be in place,” he added.
TAL chief executive Jim Minto said the findings were “disturbing” because they demonstrated how customers who stopped their insurance policies were statistically doing so at a time when they were most likely to need financial protection.
“We know that cost of living pressures are continuing to force people to rethink their domestic budgets but it is very unfortunate that those people who stop their policies for this reason do not see financial protection as essential for themselves and their families,” Mr Minto said.
Imagine a lovely world where planners chanrged an upfront advice fee to implement insurance and didnt take a commission, thus lowering the premiums by around 30% for the life of the policy. Also, suggesting levels premiums, ensuring that the cost never went up much. Clients would retain for a long time and any such an adviser would find they never lost clients due to being cheaper than competitors and also clients would retain cover for longer and thus be more protected, not to mention probably have more cover due to it being 30% cheaper!
A good case for using level premiums from the start, good communication and regular communication with the client will stop most cancellations. it is not rocket science, just doing what we do best.
The costs of living insurance policies are talked about needing to raise the price by 50% due to the reducing numbers that are either cancelling their policies or not taking them out.
Insurance providers need to understand with rising unemployment living from day to day is the main focus of many, so have all providers of the insurance products reviewed their own internal costs structures and made hard decisions.
To increase prices because producers prices have risen without making real hard internal decisions will see less and less maintaining their policies.
I keep asking the same question, and never get the answer
Are these lapse rates distinguishing between adviser sold policies and direct sales
TAL for example has a number of direct sale outlets
I do not want to see decisions made by insurers which impact on personal advice advisers when those decisions are the direct result of poorly costed group schemes in industry super and a high lapse rate(20%) on direct sales life insurance
Some of my clients have been stung with a 25% hike in Life cover premiums on renewal…no wonder people start to look around or reduce/cancel their cover. That all adds to the “cost of living pressures”. How about you insurers start to reward loyalty instead of whining about policy cancellations.
Dont you love these stories…
good on TAL at least they stick up for adviser.
j wonder if any of this has to do with people
requesting or their adviser reducing tge premiums
right down ot restructuring through super.
also that they frightened the hell out of advisers to
Actually compare the clients policy to whats out in thr
Market place for fear of being branded a “Churner”..