The June 2012 Investment Trends Planner Risk Report is an in-depth study of Australian financial planners and their usage of insurance. The study is based on a survey of 929 financial planners concluded in June 2012.

“The volatility in the markets is driving a greater proportion of clients’ investments to cash and cash products,” said Investment Trends Senior Analyst Recep Peker.

“To ensure clients continue getting value from using an adviser, planners have continued to increase the role of insurance advice within their business.”

“This also diversifies revenue streams for planners’ businesses which is beneficial for both client and adviser.”

“Empirical evidence demonstrates the importance of risk advice in the current climate, especially in driving profit growth,” said Peker.

“Our analysis shows that planners reporting an increase in practice profitability derive a greater proportion of their revenue from risk commissions than those who said their practice profitability declined.”

93% of planners now provide risk advice, up from 73% in 2005 (see chart), and they typically spend a fifth (20%) of their client time discussing insurance needs, up from 17% last year. On average, risk advice accounts for a third of the revenue financial planners are currently generating.

High satisfaction remains key to retention
Planner satisfaction with insurance providers increased and is very high overall. The number of planners rating their insurer as “good” or “very good” increased from 77% to 82% over the last year. Planner ratings of individual features offered by insurers are more mixed, giving rise to significant opportunities at an industry level.

“Insurance providers have done a remarkable job addressing some of planners’ key needs identified in 2011,” said Peker.

“Significant improvements in the areas of IT systems, websites and support have helped drive overall satisfaction up.”

“Satisfaction is critically important to retention as planners are very willing to seek out the best insurer for their clients.”

Nearly half (47%) of financial planners said they reduced usage of or stopped using at least one insurance provider in the last 12 months, and a very strong statistical relationship between satisfaction and switching behaviour continues to be evidenced.

“With planners demanding further enhancements to underwriting and technology, these areas will continue to be key battlegrounds for insurance providers over the next year”, said Peker.

The top three insurance providers by overall planner satisfaction in 2012 were:

1. Asteron Life
2. AIA Australia
3. Macquarie Life

Three quarters of planners remain open to switching in the future, with 42% saying they would change their main insurance provider for lower fees, and 34% for better features/policies.

Competition remains very heated among insurance providers
Although planners use an average of 3.8 insurance providers each for new business, they tend to place an average of 56% of their premiums with a single provider, making it crucial for providers to become a planner’s primary insurer.

Following a few years of industry consolidation, the top 5 insurance providers by number of primary relationships are now:

1. OnePath/ANZ
2. AMP/AXA
3. MLC/NAB
4. Asteron Life
5. TAL

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