Brett Wright

A recent report released by life insurance specialist Brett Wright, has shed some light on the life insurance commission debate, from an advice practitioner and consumer point of view.

The report breaks down the “Getting Covered” component of the consumer-adviser relationship and advice process, whilst also digging into the review and renewal of life insurance, claims and how the relationship between consumers and advisers works from a real world perspective.

In his report, under the “Reviewing & Renewing” section, Wright explains, “Commission/brokerage covers the cost of any market reviews and policy adjustments, whilst encouraging the client to review the ongoing appropriateness of their cover and reconfirm the value and need for it, without the fear of incurring advice and service fees on top of stepped premium rate increases at each renewal, as the client gets older.”

Versus the experience of Fee for Service (FFS), where, “Using Fee For Service, advisers will need to charge consumers between $600-$1,500 each year to do these reviews and make any adjustments, plus consumers will also need to cover any increase in premiums from the insurer too (not uncommon in today’s market for a stepped premium to increase 10-25% per year).”

When it comes to making claims, Wright points out, “When consumers need to claim, advisers are there to organise all of the forms, work with their doctors and manage their insurers, so they and their family can focus on recovering, without the stress of back and forth with insurers and lawyers.” and he also explains the huge amount of advocacy work advisers do on behalf of their clients, to maintain integrity and trust in the system at the most important time for a client, which is often whilst consumers are at their most vulnerable, after after being dealt the physical, mental and financial blows associated with losing the ability to work, or a loved one passing away.

The report also mentions how the increasing complexity of income protection claims in particular, can unfairly blow costs out for claimants, with each monthly claim submission (which will continue to become more and more complex after APRA’s intervention).

Read the report

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Wright’s report has been supported by key industry leaders such as John de Zwart CEO NEOS Life, Michael Pillemer CEO PPS Mutual, Wayne Handley MD Bombora Advice, Helen Blackford CEO Lonsdale, Millennium3 & IOOF Alliances, Don Trapnell Director Synchron, Nettie Handley Life Insurance Advice Advocate and Ben Donald Adviser and Director Austbrokers Financial Solutions.

The post Consumers reviewing, renewing and claiming on their policies appeared first on AdviserVoice.

Brett Wright

A recent report released by life insurance specialist Brett Wright, has shed some light on the life insurance commission debate, from an advice practitioner and consumer point of view.

Life insurance is complex, confusing and people don’t wake up in the morning thinking about why they need to buy it.

Life insurance advisers cut through consumer apathy and are able to do this by making the process seamless for the consumer, often collaborating with other professionals such as accountants, and willingly providing advice and services without consumers needing to worry about being charged thousands of dollars in upfront and ongoing fees on top of their insurance premiums.

Advised consumers generally receive better value for money, know exactly what they are (and are not) covered for, have superior fit for purpose cover that they can count on, and they also have the help, support and advocacy from their adviser, every step of the way. Once cover is in place through an adviser, the consumer is in complete control, the policies are automatically upgraded and cannot be cancelled or changed by the insurer to the detriment of the policy holder.

A recent 2019 consumer study conducted by Rice Warner and Zurich, found only 8 percent of those surveyed indicated they were willing to pay more than $1,000 as an out of pocket fee for life insurance advice, none of the consumers surveyed said they were willing to pay $2,000 or more, almost 30 percent of consumers said they were not willing to pay a fee at all for life insurance advice and a staggering 55% of consumers said they were not willing to pay more than $250. Couple this research with income figures published by the Grattan Institute in April 2019, which show 80% of Australian’s earn less than $80,000 per year and the typical worker earns just $57,918 per year, it is fair to state that 90-95% of consumers would not be able to afford and/or would not be willing to pay a fee for service on top of their life insurance premiums, that covers what it actually costs an adviser to provide life insurance advice and services.

Remember, that since commissions have reduced under LIF reforms, premiums have been increasing, not decreasing – Fees for Service (FFS) in insurance increase costs for everyone and wipe out affordable access to pooled risk and advice for those who need it most.

FFS makes insurance advice unaffordable for 90-95% of consumers and forces them to rely on inferior direct or group insurance products that generally cover less, cost more and deliver poorer claims outcomes; or even worse, consumers will not bother with insurance at all.

There is room for FFS and consumers who want and/or can afford FFS can access this option already. But FFS should not be the only option and it is essential consumers maintain their right to choose between the commission and FFS models, and decide which is best for them.

Read the report

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Wright’s report has been supported by key industry leaders such as John de Zwart CEO NEOS Life, Michael Pillemer CEO PPS Mutual, Wayne Handley MD Bombora Advice, Helen Blackford CEO Lonsdale, Millennium3 & IOOF Alliances, Don Trapnell Director Synchron, Nettie Handley Life Insurance Advice Advocate and Ben Donald Adviser and Director Austbrokers Financial Solutions.

The post What do consumers want and can life insurance survive after a ban of commissions? appeared first on AdviserVoice.

Brett Wright

A recent report released by life insurance specialist Brett Wright, has shed some light on the life insurance commission debate, from an advice practitioner and consumer point of view.

The government, regulators and opposition have continued with their narrative of supporting a ban of life insurance commissions (or potential ban pending an ASIC review). For those at the coalface of the life insurance and advice industries, we know a ban on commissions would spell disaster; but when the industry fights back or disagrees with this ideological “ban commissions” approach, it can be seen by its detractors, as looking like the industry is simply trying to serve its own interests and not the best interests of policyholders and the wider community.

Are commissions in the best interest of clients? When it comes consumer best interest in advised life insurance and the payment of commissions, the main factors to consider are:

• Can the consumer access policies and advice without cost barriers?
• Do consumers have the ability to review their cover at any time, without fear of additional costs on top of their premiums?
• Is cover fit for purpose and with the help of their adviser, will the consumer have the best chance of a successful claim without confusion, anxiety, financial risk and financial distress?
• Is the consumer in a better position compared with outcomes of trying to DIY?

In my experience, the answer is yes to each of the above points for consumers who arrange their life insurance with the help of their adviser under a commission model.

Do consumers believe the life insurance commission system is broken? 70% of new policies are originated by Advisers and only 0.2% of complaints that make it to decision with AFCA are against financial advisers. Based on these stats, consumer research and the sheer number of consumers choosing commission as a way of funding advice, reviews and claims services from their adviser, the sensible would argue, consumers do not believe the life insurance commission system is broken and they are happy with it.

Where have we gone wrong? There are many issues, but one of the main issues, is the government and regulators trying to fit life insurance advice (square peg), into the same framework as investment/retirement advice (round hole). What I mean by this, is it is a mistake to design regulations assuming life insurance advice and investment/retirement advice are fundamentally the same, when clearly they are not, and it is a mistake to assume the typical life insurance client’s needs, wants and capacity to pay for advice are the same as the typical investment/retirement client’s needs, wants and capacity to pay for advice, when they are not.

The regulatory environment has created a disconnect, where life insurance advice/products are relying on cross subsidy/promotion with investment advice/products, which is ok for some – but for the large majority of consumers, the need for life insurance advice and the need for investment/retirement advice could not be further apart, so why are we trying to bundle them together?

For most, life and disability insurance is very much needed when we are financially vulnerable and in many circumstances unable to pay for quality advice and guidance i.e. mortgaged to our eyeballs, young kids, starting a business and expenses are at an all-time high; which is why the added barriers of Fee for Service on top of premiums cause people not to act and go un-insured or significantly under-insured when trying to DIY.

Investment advice is usually wanted and needed when we are more financially secure, have an asset base, are planning for retirement and have the financial capacity to cover the costs of seeking out a professional adviser to help manage our money and plan for the future; which is why the investment/retirement Fee for Service model works for most.

There is room for Fee for Service (FFS) in life insurance advice and the consumers who want and/or can afford FFS, can access this option already. But FFS should not be the only option and it is essential consumers maintain their right to choose between the commission and FFS models, and decide which is best for them when funding their life insurance advice and ongoing services.

Read the report

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Wright’s report has been supported by key industry leaders such as John de Zwart CEO NEOS Life, Michael Pillemer CEO PPS Mutual, Wayne Handley MD Bombora Advice, Helen Blackford CEO Lonsdale, Millennium3 & IOOF Alliances, Don Trapnell Director Synchron, Nettie Handley Life Insurance Advice Advocate and Ben Donald Adviser and Director Austbrokers Financial Solutions.

The post Are life insurance commissions fuelling Self-Interest or Best Interest? appeared first on AdviserVoice.

Brett Wright

A recent report released by life insurance specialist Brett Wright, has shed some light on the life insurance commission debate, from an advice practitioner and consumer point of view.

In his report, Wright articulates the value advisers deliver when providing life risk advice, how consumers fair in a commission vs. no commission world, why an advised life insurance consumer is better off and why 90-95% of people would not be willing and/or able to access life insurance advice and better value advised policies, if commissions were banned.

Wright commented, “With the government, opposition and regulators continuing to say they may support a ban of commissions, I wrote this report with the sole purpose of starting open, honest, transparent and fact based conversations with politicians, regulators, life insurers, associations, licensees, advisers at the coal face, and most important of all, the consumers we serve.

I think most advisers understand the government wants change, and most of us want change too. However, the changes need to be well informed, financially viable and drive simplification and innovation in the sector, so the industry can provide a faster, fairer and better experience for all Australians, instead of adding more and more red tape, suffocation and increased costs for all.

The report is not trying to argue life insurance advice should be solely funded by commissions. I believe there is room for fee for service (FFS) and the consumers who want and/or can afford FFS, can access this option already. But FFS should not be the only option and it is essential consumers maintain their right to choose between the commission and FFS models, and decide which is best for them.

I’m totally frustrated with the lack of direction in life insurance and advice, and it is safe to say that most advisers and their clients are at their wits end too. Working closely with my own clients and also seeing how other advice businesses (large and small) help their clients every day, I still can’t fathom how or why we are still sitting here questioning the value of life insurance advice and commissions, when advised clients who fund their advice through commission, generally have access to better benefits, better premiums, better claims services and have cover that is fit for purpose, when compared with outcomes if they tried to DIY.”

The life insurance sector is at a critical point in time. The main goal and focus for all stakeholders, needs to be ensuring life insurance advice remains accessible and affordable to consumers, and remains profitable for advisers – without these two things, advised life insurance dies and a collapse of life risk pools will follow.

Wright’s report has been supported by key industry leaders such as John de Zwart CEO NEOS Life, Michael Pillemer CEO PPS Mutual, Wayne Handley MD Bombora Advice, Helen Blackford CEO Lonsdale, Millennium3 & IOOF Alliances, Don Trapnell Director Synchron, Nettie Handley Life Insurance Advice Advocate and Ben Donald Adviser and Director Austbrokers Financial Solutions.

Read the report.

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