With the increasing use of goals-based planning, advice and investing, it begs the question – isn’t it time the industry moves to a goals-based approach for life insurance too?
A couple of times a week, I go for a morning run before work. As I run through my local park, I often see people working out with a personal trainer and I find myself thinking, “Why do people need to pay someone to shout at them in order to get up and exercise?”
I’ve always been intrigued by the disconnect between what we know is in our best interests and what motivates us to act in our best interests. My regular run reminds me that people often need a ‘coach’ – or in this case, a trainer – to encourage them to act in the way they know they should to achieve their long-term goals.
In the financial services world, we see this play out between advisers and their clients. The goals our clients have aren’t going to be realised in weeks and months but rather over many years. The real value advisers bring to clients is that they play the role of ‘coach’ by driving clients to stay focused on what is in their best long-term interest.
A goals-based approach is a powerful way of doing this, given that every client has different objectives and a unique set of circumstances. This approach has been widely discussed in the industry, and a growing number of advisers understand its value to their clients.
Consumers generally do not understand life insurance. Up until now, people have had little choice – products have been either ‘basic’, which don’t quite meet individual needs, or ‘comprehensive’, which are complex and often contain features that are not needed or understood. On top of that, premiums for comprehensive insurance products are increasingly becoming unaffordable for many.
MetLife has undertaken extensive research into the Australian retail life insurance market. What we have found is that, while life insurance has traditionally been thought of as planning for worst-case scenarios, this is changing. People are increasingly thinking in terms of the day-to-day challenges they face and how they can protect themselves and their loved ones during these times.
When it comes to their family, people want to protect the whole family unit, not just the breadwinner. Increasingly, people are conscious of the pivotal role the primary caregiver in the family plays and the importance of protecting them as well.
Business owners also want to protect more than just revenue and are looking at insuring key employees so that the business can continue to operate and thrive.
At a time when our industry needs to re-establish and build community confidence, we should fully explore whether we can do more for clients by taking a goals-based approach to their life insurance needs.
This is why we are seeing a shift to goals-based life insurance – people need insurance that’s aligned to their specific goals, with products that can flex as their needs evolve. This might include access to additional cover for a specific life event such as increasing a mortgage or taking time off work to look after an unwell child.
Working with clients regularly to understand their changing needs is another essential ingredient to success. Our research supports this with consumers and business owners saying they highly value having a formal review with their adviser at least once a year, with many ideally wanting it twice a year. Having this review dramatically increases client loyalty and confidence around their insurance cover.
In other words, people want and need a good coach, and when they find one, they stick with them.
I’m more convinced than ever that this human connection is invaluable – especially when it comes to simplifying complex matters such as life insurance. For too long as an industry we’ve been focused on products and rating house scores. The product is just the vehicle to implement great advice, it’s the means and not the end. The best advisers I see are transitioning their advice model to a goals-based approach to their clients’ insurance needs and finding more opportunities to make regular contact with their clients in ways that are unique, memorable and of value.
So, get out there into the park with your clients as often as you can.
Matt Lippiatt, head of retail sales, MetLife Australia
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