Risk Adviser’s sister publication ifa on Wednesday reported Mr Brown’s comments at Strategic Insight’s Direct Life Insurance Awards. Mr Brown said customers with life insurance policies attained through advisers were “not getting good value for money” compared to direct policies.
“We do think the industry is broken at the moment. It does need fixing and I know there are big changes but if you go through advisers, you’re not getting good value for money,” he said.
“A lot of direct opportunities are great value for money and lapse rates are high.”
The story generated negative responses on the ifa website, with one person calling Mr Brown’s comments “uninformed, irresponsible and silly”, while another said it “does not deserve a reply”.
“How does providing cheaper premiums, better definitions, upfront advice, ongoing service and claims help qualify ‘as not good value for money’ when using a professional adviser?” a commenter wrote.
Houghton Strategic Solutions director Melinda Houghton told ifa that findings from the recent ASIC review into the life insurance industry showed that claims handling within direct insurance was not as good as the handling for advised insurance.
“If you’re going to say that something is a waste of money, you would also say that paying a premium for something that doesn’t pay out as often is more likely a waste of money,” she said.
“The most recent research is showing that advised insurance is cheaper and pays out more often.
“We’ve actually got ASIC backing us up and we’ve got statistics to show that advised insurance is better for consumers.”
I’d never heard of Noble Oak until a few months ago when I noticed it coming up on my planning software risk researcher. For most of policies I compared – Noble Oak was cheaper and by a huge margin.
It made me consider if this was just a short-term marketing exercise to get advisers writing their product – only to ramp up the premiums in the medium to long term to reflect the fact that the ‘book’ was massively under-funded.
For a number of valid reasons (whilst always meeting my Best Interest Duty to clients), I never recommended Noble Oak and I have a feeling from these uninformed and almost petty comments from their CEO that I was not alone.
This is another serious issue within the risk sector that the Government should be tackling head-on as part of the LIF process – that is, make it harder for insurers to simply increase premiums (particularly on ‘Level’ premium policies) once they’ve low-balled their opponents with unsustainable premium structures.
I’d like to see a system similar to the health insurance industry, where the insurers have to present a case each year if they want to increase premiums. If it wasn’t just as simple as sending out a letter to customers advising of the premium increase – without any real justification or explanation – then maybe they would put a more analytical and evidence-based system in place when initially determining the levels of premiums they intend to charge consumers.
It also goes without saying that under the new LIF rules, a clawback should be denied if the insurer increases premiums within the policy’ first 2 years.
I’m sure our sharp-as-a-razor Minister is all over this…..yeah right!!
One player in the direct marketing arena ‘confidentially’ disclosed that their Actuary had ‘signed off’ on their direct market product with the expectation of being able to decline at least 50% of all potential claims in the first instance. Whilst it was not NobleOak – it did reinforce the ‘true nature’ of direct marketed products – ask few questions at the application stage and worry about ‘underwriting’ the risk at claim time! Mr Brown, you sure are one big clown!