APRA’s latest life insurance statistics revealed that life insurers had recorded a 209.9 per cent decline in revenue to minus $6.3 billion in the March quarter, down from $5.7 billion in the December 2019 quarter.
Net policy revenue had shrunk by 3.8 per cent over the same period from $3.8 billion to $3.6 billion, the regulator’s data showed.
APRA said the net loss recorded by the industry for the year to March 2020 was $1.8 billion, a “significant deterioration” from the $759 million profit recorded in the previous year.
The regulator said the industry’s performance had continued to worsen in the last quarter of 2019 and first quarter of 2020, as risk business had performed poorly, a sign of the continuing impact of commission reform in the sector.
“For the 12 months to March 2020, risk products reported a combined after-tax loss of $1.6 billion. All risk products deteriorated with the only exception being the individual lump sum product,” APRA said.
The regulator also pointed to continuing adverse claims experience in the income protection sector, with income protection products making an almost $1.4 billion loss in the year to March 2020, a 141 per cent decline from the previous year.
APRA’s data also revealed insurers’ investment revenue had taken a massive hit from the COVID-19 crisis, declining by almost 800 per cent between the December 2019 and March 2020 quarters.
Maybe this is what the fat cat insurance executives and their lap dog (FSC) needed to see this dramatic drop in their revenues to realise that if you pay your distribution channel of risk advisers well, it’ll be worth their time and effort selling your products to a public that needs to be marketed to, educated, encouraged and then go through the application process and then risk a clawback of up to 100%.
All the advisers who think that fee for advice that equates to just two years’ commissions (114% of a zero percent commission policy) or less is the ‘right way to go’ are simply engaging in a race to the bottom and are unlikely to be around/ sustainable for the long term.
Dont blame Covid. This billion dollar disaster was man maid by none other than Kelly O’Dwyer
COVID 19 has nothing to do with it, the industry is dying and has been since LIF was introduced, what do you expect when you reduce the amount a person is remunerated, increase the cost to stay in the business, make everyone undertake an exam which has nothing to do with insurance, and then expect adviser to just accept it, as I said in 2017 the reforms will send advisers out of business and with no advisers no one will BUY insurance, the Government, FSC and anti adviser media are all at fault, and now they will get what they always wanted.
FSC Sloan and Over Bloody Complicated O’Dwyer have done such a wonderful job completely screwing the Life Insurance ADVISER Industry.
LIF and their most blatant push to destroy advisers and flog dodgy Direct Life Insurance didn’t go to well at the RC did it. Now look at the absolute mess your LIF has made.
Karma I think is the word FSC.
As for O’Dwyer, she has left a very stinky sinking ship.
LIF – The elephant in the room
“A MESS”
What do the regulators expect ,more advisers being driven from the advice industry due continual burdens placed on them ,result means less people with appropriate insurance cover falling back onto social security to survive .
It is a disgrace ,wake up to yourselves regulators before it is to late !
Regulators have built their empires with more & more regulations = they don’t give a toss for the rest of us. Public servant is an oxymoron
Whilst quite obviously COVID-19 impacts have played a part in this situation, it is nothing compared to the completely misjudged and manipulated outcome of the LIF reforms.
Experienced individual advisers, adviser representative groups and a couple of Life Insurers argued and argued against the negative impact, the increase in cost and the depletion of quality risk advice that would result.
It all fell on deaf ears as ASIC, the FSC, Trowbridge, Choice, the Consumer Action Law Centre and other all contributed to the hatchet job on the Life Insurance industry.
When Kelly O’Dwyer and Sally Loane continued repeatedly to claim the LIF would enhance consumer outcomes, it was a lie and completely misleading.
They also continually claimed it would significantly increase the quality of advice provided to consumers.
This was also entirely wrong.
If this were the case, paying nothing should therefore result in the very highest quality of advice received.
The reduction of remuneration to professional risk advisers was not and is not the remedy for doing anything other than simply destroying the profitability of practices and businesses.
Andrew Bragg was at the forefront of the FSC push for the complete abolition of risk insurance commissions and made no bones about their preferences to have level only or ultimately no commission at all.
Maybe Andrew Bragg as an outspoken Liberal politician may now like to assist in rectifying the mess that has resulted.
There have been no advantages whatsoever in relation to the LIF reforms.
There are significantly less specialist risk advisers, placing risk insurance is no longer profitable, there are extremely few new advisers who wish to be specialists or even advise in this space and insurance premiums have skyrocketed to a point where only very financially secure consumers can continue to afford them.
It has been an exercise in mismanagement for all the wrong reasons and has not achieved any advantage for the consumer, the adviser or the industry at all on any level.
It has been a mistake of massive proportions and needs to immediately be wound back to a workable solution.
The warnings were so passionately and constructively presented on so many levels and on so many occasions, but those whose ideology was the governing force of their obsession would not entertain reasoned discussion in the name of finding a suitable outcome for all concerned.
It was an appalling manipulation,often driven by the Life Insurers themselves who wanted to drive down distribution costs while enhancing shareholder value through going direct.
This was a failure.
Minister Jane Hume has a responsibility to now listen to the mistakes of the past and has an opportunity to fix the problems before it is completely beyond repair.
The Australian consumer deserves to be able to access affordable, high quality risk insurance advice and advisers deserve the opportunity to be able to deliver profitable advice and service to their clients.
At present, this is not the case.
Surely the answer is to increase the compliance burden and decrease commissions even further. That should rectify the situation.
HA ha ha …good one!!!!
Can we have a comment from Sally Loane and the FSC regarding the success of her LIF reforms?
That wouldn’t help – Useless O’Dwyer and/or Sloane would simply blame Covid, nothing to do with LIF you see and wave the issue way – just like any seasoned politician. This covid fraud covers many sins, LIF failure only being one.
I thought the maximum one can lose of anything is 100%. Not sure how one ever gets a 200% or 800% decline?
Overall the industry appears to be doing spectacularly well, as on -$6.3bln in Revenue? they made a loss of $1.6bln. Remarkable.
Even the blind man should have been able to see this coming. A result of over regulation of the entire industry, product providers biting the hands that feed, and a lack of comprehension of how that industry even works from policy makers looking for votes in what they felt was a safe place. Of all, the worst is that no-one will have the balls to look back and see why it “used” to work and be a viable industry. It will only get worse.