Adviser takes on Woolworths

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What would you do if one of your clients signed up to a Woolworths insurance policy?

Some advisers may have a hernia, others might even stage an intervention, but Chris Guy from Avant-Garde Financial Services thought he would go undercover to see what it was all about.

He registered his interest on the Woolworths Insurance website and says “I kid you not, within two seconds my phone rang”.

Another 32 minutes later and Guy was signed up to a Woolworths policy. But despite how quick it was Guy says it was far more complex than he expected. He says that all the typical questions that insurers usually ask were included in the underwriting process, and they even captured information about the different surgeries that he’s had in the past twelve months.

“I was quite surprised at how in depth the underwriting actually was. I’m not saying it was good but it was a lot more comprehensive than I thought it was,” says Guy. And he says it wasn’t even 50% more expensive, but was reasonably competitive.

“If that’s what advisers have to compete against then it’s pretty scary,” he says.

“When I say scary, I mean I just don’t understand how they get away with it and, if you want to put your risk adviser hat on, why risk advisers are subject to the level of compliance that we are.”

“I guess the concern is probably more around the uneven playing field for how difficult it is for us as advisers to get the clients on the books…We’ve still got to go through the client’s needs analysis, we’ve still got to prepare the statement of advice, we still have to go through everything, we still have to disclose everything in dollars terms and percentage, whereas with this there was none of that.”

Advisers will also cop the blame if something goes wrong because clients know who to target, which would be harder with these groups.

Guy says that it would be difficult for a layperson to judge whether the insurance is adequate or not, and that it is a bit of a catch 22 when it comes to these policies – if it’s inadequate and gives a false sense of security then it’s detrimental, but in the event of a death, anything is better than nothing.

He says he didn’t see anything flawed with the client’s PDS but he also didn’t go into the same level of questioning that he would if it was a retail policy that he was recommending to a client.

Guy’s client cancelled her Woolworths policy and stayed with him on a level premium policy – which he does most of his insurance on and says it makes a big difference.

Wealth Professional tried to contact Woolworths but they were unavailable for comment at the present moment.

  • Innocent Observer on 30/09/2013 6:09:22 PM

    @Suzanne - I fail to see your logic here. Many advisers are purposely not "jack of all trades" and explicitly exclude risk advice from their services.

    As for WOW's move into this market, I don't really have any issue with it. If you were advising WOW would recommend going into the market or not? Clearly they have excellent market penetration so the biggest barrier to entry is sorted.

    I also don't have an issue with the sales side. Acting as intermediary and keeping from actually providing financial advice frees them from mucking around with SoAs and the risk of customers arguing them in court on what they did-or-didn't disclose or recommend.

    The one issue that I do have is with product. I haven't looked at WOW's products specifically, but with some of the others sold direct (i.e., TV advertising etc) the exclusions are ridiculous.

    At the end of the day there is no replacing good advice. Not only does it ensure clients choose the right product but in most cases they will pay far less over the long term with the benefit of claims experience and assistance.

  • Emily on 25/09/2013 1:59:22 PM

    Wonder what Woolworths would say if AMP started opening grocery stores, with comparitive prices and less red tape.

  • Suzanne on 25/09/2013 12:17:11 PM

    If advisers had been doing their jobs this kind of insurance would not have a market. For many years advisers have only gone after investment income and failed to provide adequate advice on insurance. As a result they have been regulated to ensure that clients are covered. Woolworths are not recommending to borrow funds to invest or take out a mortgage for a home or anything else. They are only filling a whole in the market that advisers have failed to provide. I still believe that some is better than none and it's our jobs as adviser to ensure our clients are insured adequately.

  • Chris Guy on 25/09/2013 11:11:49 AM

    @ Sue - Yes, I thought that may have been the case, especially when the second last thing the consultant told me was "this is general advice", just before saying "thank you and good bye". The other concerning thing is I was not read or made aware of my Duty of Disclosure & Non-Disclosure until AFTER i had completed the personal statement. The consultant was reading from a script, so it wasn't a mistake.

  • Sue Laing - the risk store on 25/09/2013 9:34:00 AM

    This is general advice and as much as it grates us on behalf of consumers, it's legal not to give advice on suitable levels of cover in the direct insurance process under a general advice licence. It's been happening for years. In fact if they (the Woolies call centre people) did help a client reach a decision on a sum insured THAT would be illegal! Unfortunately the client will never 'get' the fact that they need advice on the amounts suitable for their circumstances and so the result can be presumed to be inadequate in the majority of cases. It really is buyer beware in this area of our industry and always has been. Wait for the complaints on several levels, which will then tarnish all of us with the same brush.
    There is nothing the ACCC would see wrong with this. Many products are sold on different playing fields. The point here is that you are not comparing product sale environments - you are comparing advice versus product flogging - apples and oranges.

  • StevieC on 25/09/2013 8:16:00 AM

    Great article, it just brings to the fore how over regulated we seem to be, if a firm like Woolworths (or whichever AFSL they utlise) can do this WITHOUT an FSG, Fact Find and SoA then Advisers really are being restricted against and ASIC are being anti competitive.
    While i agree that we have to carry out BID (by the way, where is it in this example?) to ensure correct levels of insurance are being recommended, we are being regulated AGAINST and it really is not a fair level playing field, ACCC comment would be most welcome.
    Again, great article Kathleen, thank you for the insight

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