Speaking at the FAAA Congress in Perth on Tuesday, general manager of policy, advocacy and standards Phil Anderson said it is vital that advice firms have a plan for providing risk advice to their clients.
“There was recent report released by CALI had said there are now 185 risk specialists, which is a very, very small number left in the country, and other suggestions that there’s around 600 advisers that are responsible for at least half of the risk business that is done,” Andserson explained.
“That’s really concerning. If those numbers are so small, advisers need to ensure that they either have a risk adviser in the practice or they have a referral model to get someone else who can provide the risk advice.
“This is a growing area of risk that clients, if they have a financial adviser, they incur an insurance event when they don’t have cover, and they argue that their adviser should have given them cover. Well, that’s something that’s a risk that needs to be managed.”
In CALI’s The State of Australia’s Safety Net report, the insurer body found that just under half of working Australians are looking for “personalised information to help them decide on life insurance coverage and suitable products”.
Around one-third (30 per cent) of working Australians who have insurance are seeking comprehensive financial advice, while 24 per cent just want basic information, the research found.
“Working Australians who do not currently have life insurance are more interested in basic information (37 per cent),” CALI added.
“Currently, there are less than 600 financial advisers who focus on life insurance in their business, with just 185 pure risk advisers currently operating in Australia. This limited supply of advisers underscores the urgent need for reform to make it easier for advisers to support their clients, and to allow product issuers to provide limited advice to their customers.”
According to Anderson, there have been a range of factors that have disincentivised financial advisers from practicing in the risk space.
“I think the LIF reforms and the changes that came as a result of that has been a really big contributing factor,” he said.
“I think product complexity has been a big factor. I think that when they when APRA made the changes to the income protection products, and everyone had to release new products, understanding those products and the changes was really difficult.”
This also extends into the realm of life insurance premiums, with Anderson noting that the FAAA has been a “strong advocate against” the practice of upfront premium discounting.
“We’ve also seen large premium increases. So, advisers working with risk clients are spending so much more of their time trying to hold on to their existing clients and work with them as they confront very large premium increases,” he added.
“It’s become a bit of a vicious cycle that premium increases lead to clients choosing to reduce their cover or cease their cover, and then there’s just not enough new clients coming in, and that means premiums are going up as well.
“So, it’s a really important advocacy space for us. We need to stay focused on the risk market and make sure that clients have access to risk solutions.”
