The past few years have seen premiums increase and the number of available insurance products grow, but the industry continues to lose money, Rice Warner said in a statement, with $1.5 billion being lost in retail income protection in the last four years alone.
Efforts to stifle these losses by increasing premiums by 30 per cent or more have not rectified the situation, the statement said, and losses continue.
The statement said that insurance companies were increasingly offering new types of cover, benefits, features and pricing options in a bid to remain competitive and make their way on to advisers’ approved product lists (APLs), but that these were not achieving the desired outcome.
“In recent years, insurers have been in an arms race to release more options and cover variants to the market. The aim has been to meet as many potential customers’ needs as possible,” the statement said.
“However, this has led to product definitions becoming more lenient and proliferation of benefits without the necessary adjustments to product pricing.”
Additionally, the trend towards ‘simplified benefits’ was designed to help rein in the cost of policies to more affordable levels, Rice Warner said, but these are “difficult to sell through advisers”.
“Advisers have a duty to look after the interests of their clients and many are cautious about recommending customers take a simplified product as these products can appear less valuable than the products they replace,” the statement said.
Rice Warner warned that “a catalyst is needed to break this cycle” or the retail sector will risk losing business to group insurance offered through superannuation funds.
“Already, much of life insurance in Australia is provided through superannuation and this share will grow if the retail market does not sort itself out,” the statement said.
“Retail premium rates cannot keep rising, or group products will become even more competitive and advisers will be squeezed out.”
By “advisers will be squeezed out” I assume you mean the few genuine risk advisers who are left after the disastrous finding by Trowbridge and the government’s total lack of comprehension of a solution to such a simple issue as churning! The insurers have always had this issue covered and simply found a brilliant way to pay less to advisers!
Group rates are rising more than retail rates, we can write it cheaper inside super than the industry funds
This article has me a bit confused. The only reason that individuals might select insurance cover from their super fund (and I’m referring to their Industry/Union Super Fund) would be down to misleading advertising and poor journalistic efforts by some in the media.
When there is a continual bombardment on the airwaves that “we dont pay commissions to financial planners” & “banks arent super” & “dont let the fox into the henhouse” what do you expect but a turning away from individuals to a source that is supposedly unbiased. Well we know that’s not true, but the public doesnt. There were reports yesterday in The Australian that unions have creamed over $130 Million from Union Super Funds over the past 3 years. The CFMEU was chief amongst those draining $75 Million.
Then you have Adele Ferguson at the SMH were every issue that is a negative in financial services, becomes the fault of financial planners. Peter Kell was testifying before a Senate PJC and said that insurers needed to be more mindful and Adele managed to turn that into a rant about financial planners. We are not the insurers!! But never let that get in the way of another ‘award winning article’.
Then you have Kell & Medcraft at ASIC who have peddled the biggest crock load of misinformation regarding churning, when Kell turns up in the above PJC hearing and says that there may be only 50 or fewer advisers that are suspected of churning. That’s suspected only, no actual evidence at this point in time. So a fabricated report, massive changes to the industry, legislated reductions in income for advisers and and all for 50 or fewer advisers. You just cant make this shit up.
And now Rice Warner say that advisers are reluctant to move clients into cover with ‘simplified benefits’. How could you with BID?? And not get a permanent banning by ASIC?? Should I recommend my clients take out their TPD cover with Australian Super, where they can enjoy a ‘simplified benefit’ of only getting a payout if they can NEVER EVER return to work?? Sure, why wouldnt? Never mind that this cover is still more expensive than a retail policy in most cases for cover that is pure crap. Maybe I could send them to QSuper so that they could enjoy the simplified benefits of having their TPD paid to them in instalments while they were monitored continually for up to 5 years and have their TPD benefits drip feed to them. That’s a better outcome for them. Imagine if AMP or the Banks came up with this tripe. There’d be a please explain from ASIC, a PJC enquiry, outrage from Whitehead at Union Super and an award winning spray from Adele. But when those warm fuzzy people from Union Super do it, not a peep…… Cue the music “We’re all in this together…..” #UnionsArentSuper
This is healthy competition is it not? Less profit for the product providers and a better deal for consumers, facilitated by advisers. Ripping premiums out of super accounts without getting the permission from members may be more profitable for the life insurance companies, but it is immoral behaviour that will eventually be outlawed.
One point to remember is YOU GET WHAT PAY FOR. Any policy funded by super, unless underwritten, is not advisable. Then let’s not forget the at work rule. Cover via super is still a viable proposition and one must ask why the price difference apart from the 15% rebate and less options. Smart advisers use a combination of both and add value with riders on trauma. Price I not everything, outcomes are the important issues.