Advisers cut use of insurers: report


By Krystine Lumanta

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Insurer relationships with the advice industry were changing rapidly, with financial planners continuing to reduce their usage of an insurer in the past 12 months, according to the latest Investment Trends research.

The “July 2013 Planner Risk Report” released yesterday was based on a survey of 1159 financial advisers and studied their usage of insurance.

The report revealed 29 per cent of planners reduced the usage of an insurer in the past 12 months, while 35 per cent said they stopped using an insurer altogether and 8 per cent did both.

Those who had left their insurer did not necessarily start using another insurance provider, which was evidenced in the average number of insurers used by planners, declining from 3.8 each to 3.4 each, it said.

“This has resulted in the greater concentration of risk business written,” Investment Trends senior analyst Recep Peker said.

“Planners write 64 per cent of premiums through their most-used insurance provider, up from 61 per cent in 2012 and 54 per cent five years ago.

“It has become even more crucial to be a planner’s most-used insurance provider.”

AMP and AIA Australia posted strong gains in primary market share, the report said.

The top five insurance providers by number of primary planner relationships are now AMP, OnePath/ANZ, AIA Australia, TAL and BT Life.

Furthermore, the report found platforms were becoming more important in the insurance market.

The proportion of risk premiums written on platforms was growing, with planners writing 39 per cent of new risk business via a master trust or wrap platform.

This was up from 34 per cent of premiums just last year and up from almost zero 10 years ago.

“The reason this is so significant is because the concentration of risk business is even greater among advisers using platforms, partly due to the limited range of insurers available on most platforms,” Peker said.

“This means insurers without a platform will need a more compelling proposition to compete.”

Having multiple insurance providers available on platforms could help drive more insurance business to platforms, he said.

“The main factor inhibiting more risk businesses on platforms is the limited range of insurers on offer and indeed planners continue to ask for choice of insurer on platforms, most often because they believe this allows them to provide the best deal for the client,” he said.

The report found the amount of client time spent on talking about insurance needs fell slightly to 18 per cent, after reaching the highest level recorded in the seven years of this study last year, which was 20 per cent of client time.

“The volatility in the markets that lasted most of 2011 and 2012 had driven planners to focus on increasing the role of insurance advice within their business, but the return in confidence earlier this year has meant planners were able to write a lot of non-risk business this year,” Peker said.

“An outcome of this is that they are again spending the normal amount of time talking to clients about their insurance needs.”

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