One-third of planners change insurers

Switching insurers common among advisers.


By Julie May

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The number of advisers switching insurers over the past year remained substantial, with more than one-third of planners opting out of at least one relationship over the 12-month period, new research from Investment Trends revealed.

The group’s “June 2015 Planner Risk Report”, which was based on a survey of 852 advisers, showed planners were also adding insurers at a faster rate, with the typical adviser now using 3.9 insurers, up from 3.7 in 2014.

“There is a strong link between insurer satisfaction and switching behaviour, and insurers looking to retain their relationships need to ensure they are responsive to financial planners’ needs and keep them satisfied,” Investment Trends senior analyst King Loong Choi said.

Further, there were great opportunities for insurers to benefit from the switching, but they needed to be careful to not lose out from that either, Choi said, adding the level of insurer switching was likely to continue over the next 12 months, with one in five advisers in the market for a new relationship.

“What financial planners expect from insurers evolve each year with insurers setting the bar higher and higher each time they improve their offering,” he said.

“For example, the focus on improving underwriting by some insurers over the last year has made it an essential component of success in acquisition of new relationships.”

Meanwhile, the research also revealed proposed life insurance reforms stemming from the Trowbridge report would push more planners towards holistic advice.

Seventy-five per cent said they believed the recommendations would be implemented to some extent, while 80 per cent said they expected to make changes to their business models.

Choi said if the recommendations were implemented in full, they had the potential to disrupt the industry, particularly as advisers expected stand-alone insurance advice to become less profitable.

“Our research shows more planners anticipate they would move to a holistic advice model and use superannuation and insurance advice to help recoup some of the lost revenue,” he said.

“Those who already provide risk advice as part of their comprehensive advice, meanwhile, feel they may need to charge more for this advice.”

While upfront commissions were a key component of financial planners’ revenue from insurance advice, comparisons to Investment Trends’ 2014 results showed planners had already begun the gradual shift from upfront commissions to hybrid commissions and fee-for-service.

“Planners are typically already going through the process of phasing out upfront commissions and replacing it with hybrid commissions and fee-for-service,” Choi said.

“The implementation of capped upfront commissions, as per the Trowbridge recommendations, would see this process speed up, and challenge those not already doing so.”

He also highlighted the top four insurance providers by number of primary planner relationships were OnePath, AIA Australia, BT Life and TAL respectively.

Advisers also gave Xplan the highest overall satisfaction rating for risk software.

Fifty-nine per cent of planners used Xplan's risk modules as their most-used risk software, followed by Coin at 20 per cent and Midwinter at 6 per cent, the report showed.

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