Last year when PCE reviewed the IBIS Life Insurance Report we noted that "people don't buy what they don't understand".
At that time complexity, ease of doing business and education were key tasks the industry had to tackle to address the issue of underinsurance.
At its core insurance is there to protect those who would suffer a financial loss, hardship when faced with a death, disability or trauma.
So why one year on does the same message we've been hearing for 20 years still dominate the most recent report?
The industry still provides product complexity as a solution to one of the basic core drivers of human behaviour : the need to defend.
Calculating underinsurance is not an exact science : some say it is not a problem and suggest it only affects 20% of the population.
Other figures range from $700 million to $1.4 billion dollars.
And while superannuation is set to remain an important market for selling insurance there are long term issues with this solution. Robbing super now to protect cashflow in the present disminishes cashflow in the future.
Disappointingly initiatives such as Lifewise : whcih many insurance advisers don't seem to know about, to raise awareness about insurance, dispel myths and suggest strategies to mitigate the risks, seem under utilised and hence ineffective.
But the way forward may be technology.
Imagine a community of life insurance customers, positive claimants (99% of claimants by the way!!) all engaged with the insurance companies and advisers. That's a powerful community to spread the word and protect more families and businesses from the risks and reality of financial devastation.
Forging a community that thrives on dialogue and accessibility may be the key to and companies that lead the way will be well ahead of the curve.
This is sorely needed, the boom in SMSFs and the requirement to consider life insurance can only be effective if advisers in the SMSF space are true believers in insurance. At this stage this seems a wish rather than reality.
Why?
According to IBIS the top four industry participants in advice account for 54% of premiums. Think about who those advice players are and think about the usage of platform in those groups. The concentration is set to get higher and what comes with that is possibly a focus back to funds and transaction rather than pure risk advice from dedicated risk professionals as these groups struggle with the loss of the skills of life agents. As they ramp up there risk initiatives though maybe the power of numbers in their adviser force will be the solution?
Complexity needs addressing but key to addressing the issue we feel is:
- strong risk value propositions by advisers
- greater client engagement and involvement using technology
- a shift to advisers creating communities of clients
- insurers demystifying the process and collaborating with advisers to make insurance more accessible
Who is going to lead the pack?
Andy, as you say the problem is huge, and really quite tragic for those that are not insured when the unforseen tragic event occurs.
ReplyDeleteI know you are doing your part to help advisers such as ourselves use technology!
Well done. Kaye Ackerman- Lifelong Financial Solutions
Hi Kaye : yes massive issue but there is a lot happening behind the scenes and I hope that through platform providers who are forward thinking enough to allow multiple insurers on and also a social media connection to build these communities we can tell more positive stories
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