Forte Dealer Solutions director Steve Prendeville says the reason there are no sales in risk books is due to advisers wanting to hang on to them and not because of a lack of buyer demand.
“The great thing with a risk book and the underlying business that it creates is that, unlike financial planning which is meant to underline investments, with insurance it’s actually not subject to economic or market influences,” Mr Prendeville told Risk Adviser.
“In actual fact, often the insurance policy is indexed to increase every year, at least by CPI or even further given the [client’s] age, so it’s actually a growth asset which is not subject to variation.”
Mr Prendeville said the only real risk to an insurance business book would be the age of the clients within the book.
He said the profile of such a client would be someone around the age of 60, has paid off the house, is cashed up and has sold his or her business.
“The insurance business books that have been successful are associated with mortgage businesses, with young people that are buying homes – first homes – and they need the insurance to get the loan,” Mr Prendeville said.
“This is where we’ve seen the growth within the industry, but that growth is hiding the mature business that is relatively static and in some cases declining.”
There is another increasing risk to insurance books. When insurers hike premiums by huge amounts as they have in previous years, clients cancel. Often times, it is not an affordability issue, it is just pure anger. Particularly when “level” premium policies get hit with increases of 10-30%.