According to Adviser Ratings data, advice practices that include life insurance as part of their service are achieving better revenue than their counterparts at$1.57 million, compared with $1.23 million.
This fact is in stark contrast to what many may perceive as the “burning platform” of life insurance, and though $2.2 billion in losses from claims costs and significantly declining premium flows, practices that incorporate risk capabilities “maintain superior profit margins of 24 per cent versus 22 per cent for their non-risk counterparts”.
Adviser Ratings highlighted a number of reasons for these numbers, including simply allowing another revenue stream into a business. It also emphasised that “risk-focused advisers demonstrate sophisticated business models that other practices should look to emulate”.
Fee structure also reveals “impressive patterns”, with some risk specialists in the highest volume categories generating up to $2,786 per client. According to the data, even advisers in the lower volumes categories command higher fees and profit compared with the broader market, “demonstrating that protection advice commands premium pricing when delivered effectively”.
The data also revealed some ways insurers are helping to transform the industry, including by viewing the growing number of mental health claims not as a burden, but an opportunity to specialise.
Top ranked firms are investing in teams that specialise in psychological conditions as well as providing advisers with support on how to guide clients through this process, positioning “advisers as genuine advocates for their clients”.
Top insurers are also developing technology beyond simple digitisation, reducing adviser workload and expanding market in what Adviser Ratings labelled a “genuine win-win outcome”.
Successful and sustainable partnership models between insurers and advisers are also key, as adviser satisfaction has been proven to deliver better outcomes for clients, with Adviser Ratings highlighting some insurers that enjoy adviser loyalty because of this.
“PPS Mutual particularly excels in understanding client needs, product quality, and comprehensive coverage options, while NEOS leads in operational efficiency, underwriting ease and platform functionality.”
Collaborative product development is vital in this process, it added, with the top-ranked insurers actively engaging with advisers “to understand evolving client needs and market dynamics”.
Leading insurers also create “comprehensive support ecosystems that address practice management needs, client communication and ongoing professional development”, rather than treating them as distribution channels.
“Addressing and supporting the current advice practice challenges will ultimately separate successful insurers from struggling ones based on their approach to adviser relationships,” Adviser Ratings said, adding that insurers that continue to view advisers as a potential cost burden will continue to struggle.
At this stage, market leaders in this area are not the traditional large insurers, but new players in the field who are embracing “adviser-centric innovation”.
“The challenges for advisers providing life insurance advice are real,” Adviser Ratings said. “But so are the opportunities for insurers willing to lead rather than merely respond to change.”
According to Adviser Ratings data, advice practices that include life insurance as part of their service are achieving better revenue than their counterparts at $1.57 million, compared with $1.23 million.
The article fails to mention how much more stress and resources go into earning that “extra” $340k but me thinks it is a loss leader and far from worth the additional effort…! The lack of insured Australians falls at the feet of the former Liberal government, the FSC and the insurers who backed LIF. Shame and karma upon them!
Only time will tell if someone stands up and takes accountability by firstly admitting the decision to enact LIF was flawed and then immediately reverts to a future where insurance can be “sold” again by qualified advisers profitably which is not the case today.
Too late. Make that, three late.
They could reimagine the relationship like this
Stop punishing long term policy holders
Start pricing new business sustainably
Reduce the risk in the default pool by asking basic health questions before giving out cover to anyone and everyone.
Reimagine that!
Reimagine all you like but with most insurers backing LIF which changed the landscape they need to reimagine comms back to 110/20 ex GST and clawbacks to 12 months max. again to get any traction…
They were never 110/20
LIF is only one of the things that has destroyed insurance. The commission reduction (from mainly 110/10 to 60/20 for all) was supposed to come with reduced compliance and “making it easier to write insurance”. The commission drop happened, the compliance went the other way. Insurers didn’t care about compliance and now they are paying the price with reduced inflow and unstainable products and pricing.