Speaking as part of an FSC panel last week, TAL chief executive Brett Clark said the question of long-term access to life insurance “needs to be solved” as consumer access to affordable products slowly narrowed due to increasing restrictions on advisers and rising premiums.
“Any healthy industry should be growing, not for growing’s sake but because there’s an ongoing consumer need for the products and services that we provide and we need to meet those expectations,” Mr Clark said.
“But if you reflect on the last few years, access to life insurance, choice and channel and those sorts of things has tightened up considerably. I think that question does need to be solved in the longer term for the sustainability of the industry.”
Mr Clark said if current price and new business trends persisted, the majority of consumers would be locked out of access to insurance products that met their needs.
“If current dynamics continue to play out, it seems to be polarised between some people in super who have very low default levels of insurance cover, other people in the community who can afford access to advice and potentially high cost insurance products, and very little in the middle where most consumers sit,” he said.
“If you look over the horizon and that plays out, that’s a pretty poor outcome for industry, a pretty poor outcome for consumers and for government because it has an effect on public welfare.”
Mr Clark’s comments follow remarks from TAL general manager of retail distribution Niall McConville at the recent AIOFP Conference that new business in life insurance had plunged from $763 million in 2013 to $325 million in 2020.
“This is an important part of the industry if you’re trying to get a lot of momentum in the market and build a brand and you can see how much that has changed in the last few years,” Mr McConville said.
“The market has come off well over 50 per cent.”
Mr Clark said drastic changes needed to be made within the business model of life insurers to keep coverage affordable and attractive for consumers.
“We need to keep two principles front of mind – how do we get benefits to consumers who need them as quickly as we can, and secondly keep the products valuable and affordable for everyone,” he said.
“It goes to product, channel, how we present the products, intermediaries, underwriting, claims handling, the whole ecosystem.”
LIF demotivated financial advisers and risk practitioners as LIF looked like a paycut of almost 50% for advisers (110% to 60%). In reality it was more like 15% but the optics of the changes were shocking and the two year clawback period a serious hurdle even if in practice it might be a minor issue.
LIF was the worst way to motivate advisers and the results show. A 50% drop in a market where everybody is scared witless (Covid) has to be mismanagement.
Add in a doubling or tripling of the compliance burden and you lose the wholistic advisers as well as insurance advice becomes uneconomic.
The massive increases in claims are difficult to manage and handle.
Mismanaging your agents at the same time and burdening them with vastly more red tape is a sign of stupidity. Perhaps not for those managers who instituted LIF as they got their bonuses but why are the current incumbents staying with this suicidal policy? Why are they not lobbying for a reduced red tape burden?
As a holistic adviser I am moving to just strategic insurance advice. I am loathe to recommend specific products anymore given the ridiculous premium increases. When an adviser recommends an insurer that then slugs clients with huge increases it taints the broader advice relationship.
The insurance crisis is caused by 3 things:
1. LIF
2. FASEA
3. Insurers paying fake/exaggerated mental health claims and passing the costs onto other policyholders.
Points 1 & 3 were under the control of insurers. They only have themselves to blame.
I think the TAL executives are afraid they wont get their fat bonuses this year.
Hi Tal, I hear you but am wondering why an existing client of TAL’s can cancel there existing policy and purchase a new TAL policy 30% cheaper? Said client entered the contract in 2012 on series 30 and is paying 30%+ more for being loyal. Does that mean the current product, series 39 is that much worse than series 30?
Most likely, yes.
This is a great point, they bleat on about losing money, but none have the guts to actually price the insurance correctly in the first place for new clients. No, we need to offer discounts to new clients and shaft the existing ones. Heres a idea for tal, and for that matter the rest of them, go back to the drawing board and work out how to price new business so you can make money. Look at your default super book and maybe seperate the pools into smokers and non smokers for example, its called knowing the overall risk on your books and pricing it correctly. If you insurers keep playing this stupid game of discounting new business you will fail miserably in the long term. This isnt rocket science! Its business 101, price products to make a profit.
Hey FSC, ASIC and Govt, LIF is going well isn’t it ? NOT !!!!
You morons stuffed it to shaft advisers and try to flog more dodgy, expensive direct Life Insurance until the RC killed that crap off.
Now what are you going to do to fix it for Real Advisers and Real Life Insurances ???
So Advisers are now valuable distribution option, shame TAL [ and other insurers ] didn’t fight for them when the FSC demanded the LIF & FOFA reforms, we told you this would happen, but did you listen, NO, now you cry for help. Demand the scrapping of the LIF & FOFA reforms, return insurance remuneration back to the “Free Market”, scrap FASEA for “Risk” Advisers, maybe you could lure a few of the old Advisers back and make it profitable for them to be in business.
YES, everything [b]MARK HARRIS[/b] (above comment) said!! Please read it again, especially if it is a life industry exec reading this! Note the part about no idiot FARCE-IA exam for risk advisers – totally inappropriate as is the 8 unit uni degree required for 2024. Hurry u[b][/b]p too, as I’m out by December, after 36 years, if this lunacy isn’t fixed.
Only in this industry do you specialise without being a generalist first. FASEA is the way it is, get on the bus or get out. Most of the problems that we are dealing with are as a result of ‘book building’ salesmen initially attracted by low barriers to entry, big commissions & little regulation. After decades the chickens are coming home to roost
Why would they scrap FASEA for risk advisers? Your motivation is obvious.