The life insurance industry is becoming too concentrated, as advisers call for greater insurance choices available on platforms.
The July 2013 Investment Trends Planner Risk Report showed that planners write 64% of premiums through their most-used insurance provider. This is up from 61% in 2012 and 54% five years ago.
The proportion of risk premiums written on platforms is also on the up, with planners writing 39% of new risk business via a master trust or wrap platform. This is up from 34% of premiums just last year, and up from almost zero ten years ago.
Investment Trends senior analyst Recep Peker says that this is significant 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.
“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.”
Having multiple insurance providers available on platforms could help drive more insurance business to platforms. However, advisers are also dropping the amount of insurers they use, as 29% of planners say they reduced usage of an insurer in the last 12 months and 35% say they stopped using an insurer.
FoFA is set to be a catalyst for planners to write more risk business, with 23% of planners saying they plan to provide more life insurance advice as a result of the reforms.
At the moment however, advisers are far from the first point of call for consumers. Roy Morgan research from the 12 months to July shows that only about 6% of Australians get their life insurance from an adviser. This was further broken down into those who went through an institutionally aligned adviser (3.1%) and through an independent adviser (3%).
The most popular way of getting life insurance is by contacting the insurance company by phone (23%), followed by getting insurance through an employer as part of superannuation (17.6%).