Research from MLC Life Insurance investigating the cost and efficiency of delivering life insurance found that while 67 per cent of risk advisers said they have experienced a reduction in profit since the introduction of the Life Insurance Framework in 2018, 42 per cent also said they haven’t made changes to their business model to accommodate the reduction.
Further, just under half (48 per cent) of risk advisers said they felt they were ready for the next phase of LIF to begin in 2020, while 33 per cent said they were not ready for the changes.
From 1 January 2020, maximum upfront commissions decrease from 70 per cent to 60 per cent (plus GST) for new life insurance policies.
The whitepaper also found that, on average, a total of 10 hours is required by a risk adviser to prepare and implement life insurance advice for a client in simple cases, and up to 15 hours for more complex cases.
Sean McCormack said that unless the costs are reduced, commissions alone would be unlikely to support the profitability of current advice models, impacting the number of Australians who are able to access advice.
“We strongly believe in the value of quality, lifelong financial advice and believe more Australians would benefit from receiving it,” Mr McCormack said.
“However, unless advisers can remove 20-25 per cent of the current cost base for each business, advice will not be profitable, leaving many Australians to make important financial decisions on their own.
“At a time when Australians are taking on an increasing debt, access to advice is critical for the prosperity of our nation.”
Life insurers need to help advisers more
The whitepaper also said life insurers need to do more to improve the advice process by simplifying and speeding up the policy application and underwriting process.
It found that the application process and client’s personal statement are seen as processes needing greater efficiency by 63 per cent and 53 per cent respectively of advisers, with criticism focused on the length and number of questions in the personal statement.
Policy administration (57 per cent) is also highlighted for improvement citing long waiting times on the phone for queries especially when managing existing clients, while the quote process (38 per cent) needed to be faster, with more automation.
In addition, underwriting guidelines needed clarification (37 per cent) and the process needed to be quicker with more pro-active third-party medical reports.
Claims time frames (35 per cent) needed to be shortened and a single case manager appointed. Advisers also said better software was needed for running reports.
Mr McCormack said life insurers must invest in technology to improve its efficiencies.
“The message from the whitepaper is clear: We need to improve the implementation and ongoing management process of insurance and use better technology to deliver greater efficiency to advisers and their customers,” he said.
“While this is only the beginning, we believe that delivering an efficient experience that is digitally enabled can reduce the cost of delivering advice and support advisers to ensure that their businesses can be sustainable in to the future.”
Jeans West failure blamed mainly on disruptors and rarely blamed on poor consumer attitude to spending anywhere. All the disruption (LIF, FASEA, ASIC) in the advice industry is from a Coalition Govt, who most advisers would normally support.with a vote! Until advisers really lodge a protest vote(just once) , Morrison will not care. The banks, and their political donations, will ALWAYS WIN
Actually the blame is not with ASIC or APRA or the LIF companies etc – it rests squarely with AFA , FPA both of which are run incompetent folk who just simply complain about regulators rather than working to influence them. For an industry that is so powerfully positioned – adding value to the $ 3 Billion super portfolio etc, it is appalling that we are represented so poorly.
Another targeted and manipulated survey. New business is significantly down year on year since the LIF and it will get worse next year. Insurers desperately trying to cling to the LIF wont accept the ship is sinking. Most risk advisers will get out between now and the qualifications because writing new business is UNPROFITABLE
Lapses increasing thanks to the same insurers gouging existing customers whilst offering discount on new business.
And these idiots think investing in technology is the way forward though one thing MLC should consider is fixing its existing business admin which is the worst in the industry.
Watch the underwriting, and BDM culling next year and if the execs still want a job in the future they had better start listening about the LIF. This con job under the guise of the FSC has backfired on them.
If you ask the following question, would you prefer no commission or would you prefer 5% commission on annual premium, every adviser will say 5%. Now you have a research statistic stating advisers prefer 5% commission. Which is not true. I believe this article is the result of limited options when choosing a answer which manipulates the survey for a desired result. Many surveys I have completed lately, I had to select the best option available but it wasn’t the correct option.
The insurance company application process is fine, if you don’t have time to a do application(not considering advisers who use paper application) use telle -application. The real problem is the dealer groups with holding commissions until payment runs and the bullshit compliance work. Are advisers or the public any better since introducing SOA’s or dealer groups, I don’t thinks so and ive been in the industry since 1998.
When the insurance companies stop doing these manipulative surveys we will be much better off, because then we can give the real answers that the governments can make there decisions on.
Yes, I agree with the article that life insurers should be doing more to help advisers, like: 1) remove the 2 year responsibility period. 2) all agree that an industry wide 100% commission rate is needed to pay advisers for their invaluable job they do and the time it takes. 3) lobby the government for thses and other changes like they did NOT do prior to LIF. They should be an advocate for advisers with the govt, ASIC, APRA and all the special interest groups. God know, we CANNOT rely on the AFA or FPA any more to be an effective advocate for advisers.
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The life insurers have been SO BAD at supporting advisers and designing their sustainable products that APRA is now chiming in to kill benefit periods to age 65 for any IP product. How will that affect IP sales! 90%+ of all IP I’ve ever written was 65/65 ben period.
Life insurers should be abjectly ashamed of themselves – the irresponsible execs to blame should be sacked without benefits. The way they’ve arrogantly stuck their noses up at product design for sustainability AND the way they’ve treated and ignored the plight of advisers is shameful. Their comeuppance is at hand with declining sales that will end as it is for Holden currently – in tears and corporate termination. Holden was arrogant for years to consumers and they are in their death throes now in Australia. Life companies here will die for the same reasons.
Who on earth takes 10-15 hours to do an application, maybe the overall amount of time taken to prep SoA’s and strategic advice. I think they should be looking at their process…. Its a joke.
I am not sure exactly when advisers are supposed to sleep, if they have to run busy businesses, do major study, keep up with legislative change, rework their entire business to reduce costs, and now get annual opt ins to keep feeding their families?
Good work to ASIC on bringing the Life industry to its knees, and good on APRA for putting a nail in the coffin with capital requirements. These “consumer outcomes” that the gov’t constantly spruik, and were the basis for LIF, are yet to be seen, as premiums have been jacked up, people are cancelling, and new business is dead. Government intervention has been terrible.
This “research” report has a number of flaws I can’t get my head around.
Simple risk advice = “on average” 10 hours = cost $1,000 = $100 per hour
Complex risk advice = up to 15 hours = cost $5,000 – min. $333 per hour, which is the equivalent of paying someone $560,000 per annum resource to do the work?
Funny how the cost of the advice always seems to be $500 less than the premium too. Doesn’t seem that scientific to me…
If the point of this research is to persuade government to change LIF, then it’s obvious discrepancies like this that do more damage than good.
‘RISK ADVISERS UNDETERRED’ ha ha ha ha, this is obviously a joke. All the risk advisers I know are getting out and holistic advisers have already dropped risk-only advice. The only way consumers will get financial advice on life insurance going forward, will be if they commit to paying a high ongoing service fee. Young families, who need help with important income protection and life insurance will have to navigate through the world of dodgy direct insurance and industry fund sales staff who masquerade as ‘advisers’. Good luck is all I can say!
That has been my experience as well – I continue with risk but a number of wholistic peers that I know are getting out and prefer to refer.
Interesting times ahead. The industry needs to better articulate the benefits of personal risk advice as well as what the process entails. ASIC also need to be reminded that people who receive personal risk advice have fewer lapses as well as better claims experience (as evidenced in a recent asic report). The attacks on this industry must stop. Enough is enough..
That’s what we pay the AFA and FPA for- to push back and protect our interests. When are Dante De Gori and Philip Kewin going to get fired -?
Perhaps it is time to become mortgage brokers!!