Risk advisers have given advice that has meant a large number of Australians have life insurance, income protection insurance, trauma insurance, and total and permanent disability (TPD) insurance and claims are being paid to them in their time of need.
According to APRA data, over $8.5 billion in life and disability claims were paid to Australian consumers (your clients) in the year ended 30 June 2016. Of even more relevance is data in the May 2018 APRA and ASIC joint release on new life claims. There it is reported that 98 per cent of all death claims on individual advised policies were paid out, whereas only 88 per cent of individual non-advised policies were paid out. For TPD claims the discrepancy is greater – 86 per cent of individually advised policy claims were met as opposed to 67 per cent of individual non-advised policies.
If not for these advisers, many life insurance policies would not exist. If not for these advisers, even people who are the beneficiaries of life insurance might not be paid the claims they are entitled to because they don’t know how to make a claim, or, in their hour of need, they don’t have the resilience to persist with a rightful claim if it’s contested by a life insurer. If not for risk advisers, there would be an even greater social security debt, an even greater burden on other Australians.
But in the face of such pressure on our industry, it’s understandable that advisers are losing heart. There are so many uncertainties – what will the future look like? In my 50 years in this industry, I have never seen such uncertainty. What will be the repercussions of the royal commission? Will future education requirements be so onerous that most risk advisers, who currently deliver great outcomes to clients, fail them?
Are the education requirements currently under consideration being drafted to ensure that life insurance advisers fail? It’s difficult to think otherwise when specialist risk advisers will likely be required to sit the same exam as financial planners, despite the two being quite different disciplines.
It’s difficult to think otherwise when the proposed exam is four hours long, when it’s closed book, when, if you fail it three times, you’re out. But most of all, it’s difficult to think otherwise when 30 per cent of the exam will be on chapter 7 of the Corporations Act. Chapter 7 outlines financial services and markets, is 500 or more pages long and includes many sections that are not relevant to the day-to-day work undertaken by risk advisers.
No amount of irrelevant further education changes the way life insurance advice should be delivered to Australians – and that is, giving people advice that takes into account their specific risk insurance needs and protecting them and their families against life’s uncertainties.
But in the face of ongoing uncertainty and unreasonable demands, many professionals who have been delivering great risk advice for many years and have secured great outcomes for their clients will throw up their hands. They think it will all be too hard. They will listen to the doomsayers and believe risk advisers will become extinct, wiped out by excessive education requirements and overzealous regulation. But we must also be very aware of self-fulfilling prophecies.
Let’s not engage in rhetoric that sends us to our doom, let’s continue to operate and let’s continue to deliver great service to the people of Australia, despite the prevailing conditions. And instead of living our professional lives in fear, let’s continue to work on influencing the people who make decisions about our industry, so that we can at least play a role in our own future and hopefully arrive at sensible, workable solutions.
Don Trapnell is director at Synchron
Without stirring the pot to much i am confused at why so called specialists have a problem with further education. Referring to yourself as a specialist implies some above average knowledge, so why would education be a bother? If you intend on retiring in the next few years then sure don’t bother, but if you wish to remain in an industry and refer to yourself as a specialist, i don’t think it is too much to ask that you can back that claim up with a commitment to education.
And let’s hope Synchron’s ASIC investigation for on-boarding three advisers terminated for poor compliance by Dover in February this year, despite poor reference checks from Dover, is not too costly.
Well said Don
We don’t want to fall further back in the under insurance stakes
There are needs everywhere from individuals to families to Businesses and it’s our respective responsibility to help people identify their needs and arrange for a trusted adviser to look after them
Keep writing Risk guys!
David phelan
‘Irrelevant education standards’. That’s a ridiculous comment. Anyone advising clients should know section 7 & ethics. The standards don’t go far enough. Aside from the standard for all advisers there should be additional testing for those areas the adviser actually advisers on. Let the dinosaurs go and leave the industry to those of us who are professionals not flogging products.
Don for PM! Mate if ever you start a professional association please let us know. Bet ASIC will be targeting Synchron next unfortunately, as they hate anyone telling the truth.
No changes required, nothing to see hear folks. That strategy didn’t work for FoFA, Didn’t work for LIF, didn’t work for FASEA but…..hey it might work under a Labour Govt. Let’s see how we go hey.
Other than that it is good to read positive articles for once but a bit late. Shame we didn’t have an Association that acted for advisers.
Thank you Don. We all need an uplifting voice and support in this environment. I totally agree we are being put to the test with unreasonable demands and expense whereby if reason had prevailed there could have been a separation of the Licensees with their vertical integration and product issues and claim behaviour and Advisers per se. None of us want to support bad behaviour however I feel we are all being punished for a few.
“Resisting change is like holding your breath, if you persist, you die.”
Blindly accepting that the regulators know best is a pathway to oblivion
we had it coming. this is what happens when the industry refuses to raise standards and let the government set them.
we know how that ends from experience in other industries, disastrously, no surprise there and it is where we are headed.
still, most people on this forum vociferously oppose the proposed fasea education and exam requirement which will in time move us to become self regulated and where we can get rid of a lot of the duplication and wastage in compliance
you cannot wish to be a profession, have dismal standards and then complain when the government steps in because it is not adequate. in fact, that is a logical sequence.
we will be destroyed before we start anew.
The challenge is getting ASIC, FASEA and the govt plods to read and digest Don’s comments properly. If they are given the opportunity to read such well considered comments even the most wrong-headed goose amongst them would have to concede what he says is correct in large part. What chance so you all think there is that they will read it?! Don should be in Canberra screaming from the rooftops as he’s about our only hope at this point. After reading it and being reminded in a concise way about our current situ I am ready to leave and indeed will be inside 2 years. The current situ for risk writers is untenable. Idiot bureaucrats and pointy-headed FASEA academics should be abjectly ashamed of themselves.
Just had a quick read of the reports referenced in this piece by Don (I believe they are Report REP 498 Life insurance claims: An industry review & 18-150MR APRA and ASIC release new life-claims data) and I think it’s important to highlight the following:
1) As detailed in REP 498, less than 20% of policies are sourced via advisers/insurance brokers. Under 20% comes from non-advised methods (online/telephone/mail-outs) and the majority (60+%) is via group life/superannuation.
2) $8.2 billion was paid out across the board to those insured; premiums were in excess of $15 billion. I couldn’t see a breakdown of costs associated with advised/non-advised/group – but it’d definitely be interesting to see.
3) I note that whilst there were comparisons made between individual advised and individual non-advised policies… there was no mention at all of group policies. From what I can see there was very, very little difference in accepting/declining between group & advised.
4) The 98% acceptance rate for new retail Life policies and 88% for new retail TPD policies are great figures – but looking at REP 498 they appear to fall a little.
5) REP 498 also states that “[i]In October 2014, we released a report on a surveillance we undertook to understand the personal advice consumers were receiving about life insurance from financial advisers. In that report, we expressed concerns about practices in the life industry such as unacceptable levels of poor-quality advice and a strong correlation between high upfront commissions and poor consumer outcomes, including where the recommendation was to switch products.[/i]”
I don’t want to dismiss the importance of Life Insurance or the role of Advisers who specialise in the area – but I think it’s definitely important to look at the bigger/broader picture here.
Group life & default super insurance is just another type of non advised.
I think the more important figures are the average size of the claims made under advised business vs Non advised business , I don’t have figures to call on, But I would be willing to put money on the advised business paying out a claim anything up to 3 times the size of a direct / non advised product.
if someone knows, that might be an interesting stat!
Don, I think you are only partially right. I’m a Financial Planner, whose discipline happens to be Risk. There is no such think as 100% risk only advice. Estate planning, tax, super implications etc ect all play a roll. Granted I don’t need the in depth knowledge of an investment adviser, I do still need to know where my advise fits in. Just because you are a Family law specialist, doesn’t mean you didn’t study commercial law or international law at university, you are taught many different disciplines of law whether you intend to use them or not, same goes for doctors , engineers…
If you want to be a profession, you must have a professional qualification.
I am a Financial Planner who specialises in Risk, I am not JUST a risk adviser. You denigrate all risk specialist by not acknowledging we are Financial Planners.
(some perspective for you: I don’t agree 100% with FASEA. 90% of my income is derived from risk. I am 53 and will be ” forced out” of my business by the degree requirements in 2024)
Heartening to see an industry leader speak with courage and conviction about the greater good of our industry!
Are you done patting yourself on the back?
Are you done bragging about your anonymous post?
what a twat wrote that comment? ISA lickspittle or ASIC stooge?
Spot on Don.
Certain singer a lot younger than us who basically sums up “Haters will be Haters”
We just have to ignore the noise and keep on doing the right thing by clients who appreciate what is being done for them.
The others will always suit themselves and likely fall for the lowest cost option as though it provides the same outcome.
Stop butchering my lyrics… “haters gonna hate, hate, hate, hate, hate..”
Don trap bell bloody well said