Paul Forbes, chief executive of boutique licensee Australian Advice Network, said over the past three years, turnaround times for a risk specialist within the group to on-board a client to a new life policy had ballooned out to as long as 14 weeks.
This included the time taken to receive authority to look at the client’s existing insurance arrangements, receive a quote, take the client through underwriting and process the policy application itself.
“The administration of life companies has pushed the cost of on-boarding new life risk clients to extremes,” Mr Forbes said.
“In this process we believe the life companies are adding almost two months of time due to their own administrative inefficiencies and lack of investment in data management.”
Mr Forbes said insurer processing times had worsened further as the COVID-19 crisis developed and life companies faced further challenges due to lockdowns offshore.
“As far as time frames they have got steadily worse,” he said.
“Some of it may be under-resourcing and some may be due to the shutdown in India and other outsourced countries.”
Darko Zigic, director of wealth services for Australian Advice Network-aligned firm Robina Financial Services, agreed that turnaround times had been gradually worsening following the introduction of the life insurance framework, and problems had been compounded due to the COVID-19 crisis.
“Previously, we were able to collect data from the providers within a reasonable timeframe [of] five to seven working days. Compared to now, where it can take up to 25 to 30 working days to gain access to a client’s account,” Mr Zigic said.
“Unfortunately, we face the same turnaround time on existing business for a ‘simple’ reduction in cover quote.
“LIF was meant to ‘better align the interests of consumers and those providing advice’. Sadly, with the ongoing administrative burden, turnaround time, and increasing premiums, neither the interests of the consumers or providers have been met.”
AFA chief executive Phil Kewin said the association had been receiving similar complaints from advisers and licensees, with insurers being hamstrung by the administrative challenges of both COVID shutdowns and, in some cases, migration of teams and products as a result of insurance company mergers.
“The feedback we are getting is working from home, it does seem to advisers that it’s taking that bit longer to get things done,” Mr Kewin said.
“That’s on average across some companies, because we know there’s a lot of consolidation going on, a lot of development going on, a lot of product change having to go on.”
Mr Kewin said life insurers were also being impacted by plummeting revenue and measures taken by APRA earlier in the year to adjust capital requirements for agreed value income protection products.
“If you’re talking about a comprehensive package of insurance that includes term, IP and trauma it can take a hell of a lot longer to get it on the books because we’ve seen the intervention from APRA, insurer profitability has been smashed and the products being written on current pricing, APRA is telling us they are not sustainable.”
“The insurers are being a lot tighter in terms of their underwriting and the risk they’re accepting. That is going to continue until this reset of products takes place over the next 12-18 months, APRA intervention washes through and we see new products coming out.”
Dont forget the production bonuses for Execs and BDMs
Firstly just let me say that I am not age 70 and looking in the rear view mirror.
I am 56 and have been in this industry for 30 years and so have seen a bit.
I believe the rot started when the mutual Life Insurance companies demutualised and became beholden to the shareholders and the market rather than their own policy holders.
Whilst there were financial commitments to maintain guarantees and Statutory No.1 funds in order to meet policy holder obligations, I believe the ethos changed when the chase for massive growth from the stock market was the driving force and the controls came from corporations and individuals who most likely held no business at all with the institution they were investing in.
This is not to say it was a perfect model, but on the whole there was significant difference in the sense of pride and respect many of the mutual Life Insurance organisations were held in compared to today.
Clearly LIF has been an outstanding success. If only someone had have foreseen these issues and said something……
I do love how when the first round of commission cuts went through, the life insurers directly claimed to me, this won’t just be added to their bottom line, but will be reinvested to improve their systems for the client experience. I wonder why I get skeptical?
So you can’t write new business profitably and in an acceptable time frame at favourable acceptable terms, the existing business is being priced out of all but financially comfortable clients range and even then they want to reduce cover to offset skyrocketing cost, you can’t get adjustments or alterations completed with existing policies in acceptable time frames to the point that client’s policies can lapse whilst waiting for responses from insurers, the insurers administration
turn around can be woeful and the public will have significantly less access to experienced and qualified risk insurance advisers and quality affordable advice and therefore hundreds of thousands will be left reliant on the Govt in the event of unforseen circumstances.
At the same time, there are still who somehow believe that removing the commission based remuneration model for Life Insurance will make all this better for everyone.
How on earth has this complete mess been allowed to develop to this point ?
Stupidity combined with greed on the part of the insurers combined with an ideological bent where regulators see financial planners as evil to answer the question.
If you charge a fee & not a commission, that will fix it…lol