Adviser Ratings reported that in 2023, just 480 advisers were responsible for writing half of all new business, highlighting a stark concentration of expertise.
This concentration is further emphasised by the industry’s broader landscape. Over 5,000 “low risk” advisers write only a small number of policies each year, while an additional 10,000 or so advisers write no risk business at all. This disparity presents both a challenge and an opportunity for the industry to re-engage these advisers and drive growth.
Compounding these issues, client needs are becoming increasingly complex. Rising health issues, both physical and mental, along with evolving client expectations, are placing greater demands on advisers. As they strive to provide comprehensive and affordable advice, the pressure on underwriting processes has never been higher.
The importance of field underwriting and early data collection
Field underwriting, where advisers gather detailed health and lifestyle information early on, is a critical skill that’s becoming less common. It helps advisers give accurate advice and avoid surprises. But with less training available, many advisers, especially new ones, aren’t as familiar with these techniques.
The need for comprehensive field underwriting is particularly important given the increasing number of health conditions that need to be considered. Mental health, in particular, has become a significant factor in underwriting decisions. Where previously some conditions might have been automatically excluded, insurers are now working to find ways to assess and include clients with mental health histories more fairly. However, this requires advisers to provide detailed, accurate, and nuanced information from the outset.
We recently conducted a survey that revealed 43 per cent of advisers see pre-assessments and underwriting as significant challenges. This underscores the critical need for improved processes and support in this area. Furthermore, 46 per cent of advisers expressed interest in receiving help with their risk advice processes, indicating a clear appetite for improvement and growth in this sector.
Inadequate fact-finding early in the process can lead to delays, rework, and frustration for both advisers and clients. It can also impact the quality of the advice provided, as advisers may not have a clear understanding of the likely underwriting terms or outcomes.
The rise of pre-assessments
One area that has seen notable change is the underwriting process, particularly the rise in the use of pre-assessments – that is, looking to receive preliminary underwriting assessments for clients. These are becoming essential tools for advisers seeking to avoid surprises and secure the best possible outcomes for their clients. However, with the growing complexity of health issues, pre-assessments can add another layer of work for both advisers and insurers.
As the industry evolves, there’s growing potential for AI-driven solutions to guide advisers through the pre-assessment process. These technologies could ensure comprehensive and accurate data collection, particularly benefiting less-experienced advisers and support staff. By standardising the health discovery process and accounting for varying levels of adviser expertise, such innovations could significantly streamline the pre-assessment stage.
The call for better training and industry support
Given the reduced emphasis on risk advice training in recent years, there is a growing need for more comprehensive support and resources for advisers. The demands of the industry have shifted, and advisers must be better equipped to handle the evolving landscape of health and underwriting challenges. This includes not only understanding the technical aspects of underwriting but also developing strong relationships with underwriters to better manage client outcomes.
Our survey findings further emphasise the need for better support: 60 per cent of advisers identified the cost of advice (viability) as their top obstacle, followed closely by compliance concerns at 58 per cent.
Despite these challenges, there’s a silver lining: 43 per cent of advisers expressed a desire to increase their focus on risk advice, highlighting a significant growth opportunity if the right support and systems are put in place.
Enhanced collaboration between advisers and underwriters is crucial. Open lines of communication can provide invaluable learning opportunities and help advisers make more informed decisions for their clients. Moreover, insurers need to consider how they can support advisers more effectively, whether through improved tools, clearer processes, or better access to underwriters for real-time advice.
Insights from industry experts
To further explore these issues and gather more perspectives, we recently hosted a Risk Conversations webinar with three chief underwriters from leading insurers: Amber Brockie (head of underwriting, MLC Life Insurance), Karen Janes (chief underwriter, AIA), and Marcello Bertasso (head of underwriting and claims management, PPS Mutual). The discussion provided valuable insights into the current state of underwriting and highlighted several key challenges and opportunities.
One of the key themes that emerged was the growing use of pre-assessments and their implications for both insurers and advisers. While these tools are helpful for reducing uncertainty and providing early insights, they can also add to the workload and strain on resources.
As Brockie explained: “The volume [of pre-assessments] has increased exponentially … We’ve still got work to do in solving that, but this tool alleviates some of the pressure.”
The conversation also underscored the need for a more robust approach to field underwriting. Janes emphasised the importance of getting back to basics in this area and highlighted the need for advisers to gather comprehensive information early in the process: “It’s all about capturing the complete picture, which can mean the difference between standard rates or a decline.”
Similarly, Bertasso pointed out that advisers should not shy away from engaging directly with underwriters to get the best possible outcomes for their clients. He noted: “Less is not more when it comes to underwriting. Giving underwriters the full picture allows for a more accurate assessment and can sometimes lead to better terms.”
Moving towards a more collaborative and data-driven future
The challenges outlined by these industry leaders reflect broader trends and pressures within the risk advice sector. As product features grow and claims incidence rises, it is clear that underwriting practises must evolve to remain relevant and effective. This includes leveraging new technologies and data sources, developing more flexible underwriting frameworks, and ensuring that advisers are well-supported and informed.
As the industry trends towards AI adoption, there’s potential for significant improvements in efficiency and customer experience. The future of risk advice lies in fostering collaboration between insurers, advisers, and technology providers. By working together to develop and implement innovative solutions, we can address the current challenges and create a more robust, efficient risk advice sector that better serves clients and supports adviser growth.
There is a strong call for the industry to embrace a more collaborative approach that includes better training, support, and communication between advisers, underwriters, and insurers. By focusing on these areas, we can help ensure that risk advice remains a vital and valued part of the financial services industry.
Conclusion
While the risk advice industry faces significant challenges, there is also great opportunity for growth and improvement. By focusing on enhanced data collection, better training, and increased collaboration between advisers and underwriters, we can create a more efficient and effective process that benefits all stakeholders. The key to success lies in embracing change, leveraging technology, and fostering a culture of continuous learning and support.
As we move forward, it’s crucial that we:
- Prioritise comprehensive field underwriting and early data collection.
- Invest in ongoing training and support for advisers.
- Enhance collaboration between advisers, underwriters, and insurers.
- Leverage technology to streamline processes and improve outcomes.
- Focus on re-engaging “low risk” advisers to drive industry growth and expand access to quality risk advice.
By addressing these areas, we can reduce surprises, achieve better outcomes for clients, and ensure that risk advice remains a vital and valued part of the financial services industry. The path ahead may be challenging, but with commitment and collaboration, we can build a stronger, more resilient risk advice sector that better serves the evolving needs of our clients.
The time is ripe for change, and we look forward to working together to make it happen.
Marc Fabris is the founder of Risk Hub.
If trying to paddle a canoe up a mountain is under pressure then yes you are correct Mark!
Most advisers would need major financial incentives to ever consider writing risk again as the current scenario is simply not worth the time, effort and energy.
Financial planners that provide advice on investments & protection can only look after 100 to 120 clients Max per annum. No wonder why 5000 odd are writing very low levels, they are not interested in more new clients due to capacity. This has a flow on affect that had led to 480 writing the other 50% of insurance, they predominately risk only advisers that are not bogged down with annual reviews and annual adviser services fee disclosure that are required to be signed each year by their clients. If the 5000 advisers had capacity to take on 100 new clients aged within 30 to 40, I’m sure the insurance written would rise. It ain’t rocket science. No one wants to take on more clients when they can’t look after them.
Some of the life companies started the rot via the Trowbridge report and shot themselves in the foot. Then came the dodgy FASEA exam. End of story.
Hint: maybe, the life insurers ended up getting what they wanted from the regulators… i.e., reduce commissions and increase responsibility periods whilst simultaneously degrading their product offer. So, it might be best to leave the poor adviser alone, we’ve had a gutful, already.
Obtaining fair underwriting outcomes for a client that has a past resolved (8 years)matter of mental health is in my view still not achievable.
A few years back I had a case where well-intentioned but not appropriately trained GPs took a decision that a female middle-age client, attending a practice primarily for the health of her children, was exhibiting signs of anxiety related to the unexpected death of a well loved parent. She rarely saw her long-term GP because of pressured to obtain an appointment for the children in after school hours.
Various GPs in that practice made notes on the records that they had discussed this diagnosis with the client, and what’s more, had referred that client to a psychologist. The notes even stated that a Mental Health Plan,drawn up by the GP, and which is a requirement to attract Medicare rebates for psychological advice, had in fact been implemented.
The facts are that the mental health claim was never drawn up and no referral was ever written to a psychologist or a psychiatrist. Yet the medical records supplied by that practice to the insurer stated the opposite.The client was adamant that none of these steps had been taken, but to no avail, in the eyes of the insurer.There were significant grounds for a reasonable person to form the view that the practice had engaged in a little bit of tick-box complianceIn their file notes, and subsequently gathered the wagons in a circle and refused to budge even after meeting with the client to discuss the report they had submitted to the insurer.And yes I have seen the reports provided to the insurer.
The insurer would not listen to adviser information as to the real situation. There had never been an appropriate professional level diagnosis and the client had never ever been off work.There was another Issue ,at that time unresolved, which subsequently was resolved with no permanent impairment and had no impact upon underwriting outcomes. Yet this particular insurer, and more importantly the reinsurer, took it upon themselves to apply the “two strikes” rule of underwriting i.e. this is too hard, too many problems, let’s knock standard terms back, and apply mental health exclusion. By the way, the waiting period being applied for was 180 days.
On that evidence and other evidence in recent times with other insurers I just don’t accept that insurers are now taking a different outlook to getting business on the books when there is a “record”, no matter how far back, of GP provided evidence of a mental health condition.And this diagnosis by GP was never confirmed by a psychologist or psychiatrist
I would agree that field underwriting is starting to look like a lost cause. It appears to me, that in the current environment of clients seeking to escape from outrageous gouging of thier legacy cover by seeking to purchase post-2021 IP contracts, that this valuable adviser skill is slowly disappearing. Which of course places significantly more responsibility on the underwriter, who has no other information to go on other than what is provided by the GP hoping that the GP acts in ethical manner when providing the information.
Recently many time poor GPs have taken up the practice of photocopying the whole file and sending it to an insurer, out of context. That’s not in anyone’s best interest in my view.
And frankly the evidence available to me is that insurers are still not getting the message. LIF is a disaster and we all know that around 60% of the genuine new business has disappeared. But many insurers are not helping themselves or advisers by cutting down the numbers on staff in key areas such as tele-interviewing, new business processing, underwriting and any other process that gets the business on the books. That’s extremely frustrating for advisers.
There may be a light at the end of the tunnel, or it could be just a reflection of a railway line
The remuneration of 60 percent is too low for the time and regulation involved in completing a Risk Insurance. 80 percent would change things.
I was a risk specialist, as a sole adviser practice we were doing alright. Then along came LIF so eventually to survive I went back to wholistic advice to pay the bills.
That FASEA exam did wonders in eliminating most of the risk only writers. What a fiasco.