LIF is the Least of Your Problems

Many advisers are concerned that the Life Insurance Framework will damage their business by reducing their income and driving up the cost of life insurance.

However, Elixir Consulting’s Sue Viskovic believes that while it is important to prepare for that change more wide reaching and extensive disruption, from new players, new technology and new ways of delivering product will impact advisers far more than remuneration changes.

As such, now is the time to prepare to ride that wave of change rather than be washed away when it arrives.

Regular readers of Riskinfo will be aware that I am a staunch supporter of risk advice and I have provoked the ire of some and gratitude of many more by sharing my knowledge that a reduction in commissions needn’t mean the end of the risk adviser. I have made it my mission to empower risk advisers with ideas, inspiration and practical tools to work through the challenges represented in the LIF in the articles I have shared and my book, Worth Paying For.

But I’m not going to talk about a reduction in commissions in this article, other than to say that the LIF should in fact be the least of your worries.

You see, I recently had a phenomenal opportunity to visit San Francisco on a thought leaders study tour.  A small group of 15 travelled to Silicon Valley and the incredibly well-connected team at Implemented Portfolios secured a range of business owners to come and share their stories around a boardroom table with us. We explored a number of financial advice businesses and fintech companies; we met with venture capitalists, we met with experts in business succession, cyber security, and big data.

There is a cluster of 800+ financial services guys in Silicon Valley and they’re out to eat your lunch

The trip ticked a number of boxes for me… to explore innovative, successful advice businesses and get an understanding of what’s happening in offshore advice markets. Not only that, we also got to meet with some seriously innovative businesses and entrepreneurs to get a sense of what fuels business innovation, and what’s coming our way. I make it a habit to learn not only from within our industry, but also look further afield to learn from other industries and professions, to take great ideas and techniques that can be applied by our clients to achieve their own evolution of advice.

So what did I learn in Silicon Valley that has any application to risk advice in Australia? As it happens, quite a lot!

A recurring theme was this culture of business innovation that is being fuelled by technology. The speed at which we are seeing all types of industries be disrupted is staggering.

One of our guests, Rich Arnold shared with us that “There is a cluster of 800+ financial services guys in Silicon Valley and they’re out to eat your lunch. I sit with guys who do nothing all day long but think about and find industries they can disrupt and there is no shortage of money from people prepared to back them because they know there are billions available in disruption.”

(You can hear more about this in my video post on LinkedIn)

There is also a fascinating paper by Raconteur called ‘Future of Insurance’ that I recommend you explore.

The bad news is that if you think your paper-based application and manual sales process is going to compete in future, and even deliver what your clients are expecting, you might want to step it up a notch

You’ve no doubt heard of the term robo-adviser…. and fintech. Do you also know of the term insurtech? Insurance + technology = insurtech. Yup, it is now an actual word,  Google says so.

The good news is that insurers are increasingly developing ways to better service and engage with their customer – won’t it be fantastic when the admin issues you experience are gone and they develop much better ways to enhance their product design and risk analysis?

There is also good news in that you will also be able to access some of these applications to enhance your own service delivery. The bad news is that if you think your paper-based application and manual sales process is going to compete in future, and even deliver what your clients are expecting, you might want to step it up a notch.

Let me ask you a question…right now, great risk advisers have an incredibly powerful value proposition – one that hasn’t really changed since I wrote about it two years ago. And yet, in the past few years we have seen direct insurance providers start to attract some serious market share.

What if you’ve been lulled into a false sense of security by the fact that the direct insurance market currently offers an inferior outcome for clients….think for just a moment – what if the direct insurers actually delivered a product that didn’t suck? Look at the volume of inflows they’re attracting with a crappy product that underwrites at time of claim…what if they were able to deliver the quality of products that you do, in a more cost-effective way?

Fearmongering is not my intention – rather it is to inspire enough self-protection to realize that the real fight ahead is not to keep commissions, it’s a fight for relevance. How will you evolve your business model and service proposition to cater to the evolving needs of your clients and compete against other players entering – or enhancing their current market?

Here are three ways you can start today….

  1. Look at what you’re doing in your business and find ways to use technology to improve your efficiencies AND your client engagement. Systemise everything you can and deliver a better client experience at a lower cost.
  2. Reflect on your client market and revisit exactly what you do for them that is of value – if you can’t deliver significant value at a competitive price point, change your target market or your value proposition to them.
  3. Heed the advice of business growth experts like us and actually write a business plan – rather than get overwhelmed by this stuff, get your big picture then drill it down into the specifics you’re going to work on over the next twelve months – which chunks are you going to bite of that elephant and in which order?

You can also read my book Worth Paying For to get some more in-depth ideas on how you can evolve and identify exactly what you deliver that is worth paying for. Shameless plug I know, but there is only so much you can deliver in an online article!

Instead of trying to hold onto a model that you can’t imagine is going to change, instead think about what is coming

That is what is going to reduce the underinsurance problem in Australia – not a huge amount of energy being expended on maintaining the status quo of a commission system.

Make no mistake – you are in a fight for relevance.  And you’re in good company with just about every other business on the planet. Instead of trying to hold onto a model that you can’t imagine is going to change, instead think about what is coming.

If you are not looking at every aspect of your business model and reflecting on how you can evolve it you’re missing the point, and a very large opportunity.

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In Practice Management, Elixir Consulting shares strategies for building better advice businesses.

Sue Viskovic is the Managing Director of Elixir Consulting and co-author of the Adviser Pricing Models Research Report third edition.

This article is an excerpt from Sue’s new, soon to be launched, ‘Worth Paying For.’. In it, Sue shares the importance of communicating and valuing their risk advice service, so they can make some mindful and considered decisions as to how to continue building a business in whatever the new insurance framework looks like.

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