Insurance advisers FoFA-ready and optimistic

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The latest measurement of the Zurich Risk Adviser Sentiment Index has shown an overall uptick in sentiment amongst financial advisers active in the Australian life insurance market. 

Conducted by Beaton Research & Consulting, the survey questioned more than 200 advisers actively writing life insurance. Respondents were asked to indicate their sentiment across five key areas, using a seven-point scale ranging from ‘extremely negative’ to ‘extremely positive’. Figures from the research showed:

  • Sentiment towards the current regulatory environment improved 17%
  • Increased optimism about the long term viability of their practice (14%)
  • A 5% increase in perceived consumer demand for life insurance
  • An 11% improvement in sentiment towards advisers’ current sales volume, and an 8.7% improvement in likely sales volumes for the next quarter

The overall sentiment score for December 2012 was calculated as 4.89 out of seven, up from 4.40 in June 2012.

General manager retail for Zurich’s life and investments business said that local economic conditions could have a bigger short term impact on advisers than other factors such as regulatory changes or the looming federal election.

“Ironically while the tide seems to be turning overseas, locally we are getting mixed signals about consumer spending and so there’s no doubt that the resilience for which advisers are famed will be put to the test. But this isn’t new news, so for them to be feeling up-beat against this backdrop shows they are up for the challenge,” said Kewin.

According to the Commonwealth Bank Business Sales Indicator (BSI), spending fell by 1.9% in seasonally adjusted terms in December, after rising by 2.4% in November, extending the erratic spending pattern witnessed over the past seven months. In annual terms, spending fell 5.6% for service providers, according to the BSI.

Commonwealth Bank general manager operations and sales strategy, local business banking Lex Thornton, believes the ongoing inconsistencies in business sales performance are reflective of today’s conservative consumer.

How do these scores reflect your view of the life insurance market? Share your thoughts below.

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  • GAB on 25/01/2013 10:38:35 AM

    Of course insurance writers are FOFA ready and optimistic, they don't have to change anything.......commissions still an acceptable form of remuneration, no need for an annual fee disclosure statement or opti-in letters.

  • Alleycat on 25/01/2013 2:04:52 PM

    Dear GAB
    There's nothing wrong with charging commission on risk insurance so long as it's disclosed to the client as required by law.
    The problem I have with those who want to charge a fee that even if you take Nil commission, the client saves 30.0% on his premiums each year is, that it's a snow job. Here's the problem.
    Where a client has to pay say $2000 for his insurance and the adviser receives $2000 upfront commission plus say $200 p.a. ongoing, is a process that has worked for over 100 years.
    Are you telling me as a fee for service recipient the client will now pay say $1400 upfront, well then what should your fee be for about 9-10 hours work to get the policy underwritten. Is it $100 or is it $1000 + for your time?
    If it's the latter, how many clients would like to write two cheques and pay $2400 for something that should have cost him/her $2000 ?. And when you do your annual reviews because the regulator expects you to do so and you spend 3 hours of your time getting to and seeing your client, will you charge him $400 for your time?
    And finally when he's so sick from a Trauma event or you have to deal with an Income Protection claim, if you do it properly, you will be hard pressed not to charge around $1500 for your time under a fee for service arrangement.
    What a great way to shaft a client on the basis of "I'm holier than thou".
    A commission adviser does all this under the payment of $200 plus age increases on the premium renewal he receives each year.
    In time there will be less risk written because many clients will not want to pay more for their insurance initially than they would have otherwise.
    As an adviser, if you think you can cover your increasing operational and compliance costs at a heavy discount, there wont be enough hours in the day for you stay in business.

  • Adam on 25/01/2013 2:23:38 PM

    Alleycat, I wish I could +1 your post! This is the crux of the matter. I have actually asked many new risk clients over the past 12 months if they would rather the insurer pay me $2,000 and clal it a commission, or they pay me $1,500 day 1 out of their own pocket and a higher ongoing? Without fail they have no problem with being paid by the product provider, no problem with it being called a commission, but a very bug problem paying $1,500 to take out an insurance product!

  • GAB on 25/01/2013 4:09:20 PM

    Sorry, my post was a bit tongue in cheek. I'm having a go at the ridiculous requirements of having to send out a fee disclosure statement for fees already disclosed in numerous other documents, then an opt-in letter on top of that. Can we even imagine the time wastage here? Invoice $600 services provided: creating and checking your annual fee disclosure statement and following up opt-in letter.

WP forum is the place for positive industry interaction and welcomes your professional and informed opinion.

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