AIA Australia Roundtable – Counting Down to Life Insurance Advice 2.0

Riskinfo joined with AIA Australia to conduct a recent Industry Round Table looking at how advisers, licensees and insurers are preparing for the next phase in the evolution of financial advice in general and life insurance advice in particular…

Table of contents (Click these links to move directly to those topics)

  1. Retaining clients
  2. Sourcing new Clients
  3. Leveraging new channels
  4. Life insurance product affordability/sustainability

Panelists (L – R)

  • Jason Spits: Senior Journalist, Riskinfo
  • Matt Hale:  Director & Senior Financial Planner, Rising Tide
  • Scott Dawes: Director & Head Insurance Coach, Dawes Smith & Partners
  • Pina Sciarrone: Chief Retail Insurance Officer, AIA Australia
  • Don Trapnell: Director, Synchron
  • David Spiteri: National Risk Manager, Centrepoint Alliance
  • Peter Sobels: Publisher, Riskinfo

While much attention has been given in recent times to remuneration issues, financial advisers also need to focus on their business models, their interactions with clients and the achievement of minimum professional qualifications as they prepare themselves and their businesses during this era of rapid change.

This panel identified the need to continue to demonstrate that advice is relationship, not a product sale, and there was an ongoing need to be relevant and engaging with current and potential future clients.

Read on to find out what your fellow advisers and other industry stakeholders had to say about preparing for the next phase of advice.

Retaining ClientsBack to top

Servicing clients is a core activity for advisers and defines their day to day activities, and directly related to that task is the retention of clients by continuing to provide services and advice when the client is not sitting in the adviser’s office. So, how much can be done by, and between, advisers, licensees and life insurers to ensure clients are retained over the long term?

For Dawes Smith & Partners Director, Scott Dawes there are two perspectives that advisers can consider – their own internal view point, replete with the issues of clawbacks, lapse rates and profitability, or that of their clients’ need to trust someone to deliver the advice they need.

we’re breeding an entire generation of advisers who believe it’s appropriate to bludgeon their clients into submission with facts and figures

“My preference is to look from the external point of view and fundamentally what it’s really about is trust. People trust us as advisers to help them obtain the right cover today, and we’re obtaining that cover on the basis that we trust the outcome we expect will in fact occur,” Dawes said.

“So, in terms of retaining clients, it’s really around that trust and relationship side of things because if we’re focussed on worrying about whether a policy remains in force for our own internal reasons versus external reasons, it will end in the wrong way. Servicing and retaining clients is about making sure they are comfortable with what they have on an ongoing basis, and knowing it will respond the way they want it to respond, if anything ever does occur,” he added.

For fellow adviser, Rising Tide Director, Matt Hale, the external view held by clients can be shaped by the type of adviser they meet and the advice they receive. Matt notes that client retention is related to an adviser’s ability to get clients to buy-in to the advice so they stick with it for the longer term.

“A lot of those retention issues come back to when sales people get an authority to proceed from the client, sign them up, and then move on, without giving the client the opportunity to really understand why the cover is there. There are going to be changes in pricing, changes in definitions, in all the stuff that worries people. But for those clients to whom we’ve just ‘sold’ a product rather than engaged them with an idea, that’s when they leave, or when they cancel their cover. If we are not doing our job properly to make sure that they really understand why the cover is there, we’ll continue to see people drop off one, two or three years into the equation,” Hale said.

From a licensee perspective, Synchron Director, Don Trapnell and Centrepoint Alliance National Risk Manager, David Spiteri see the retail life insurance industry as having structural strengths and weaknesses that both help and hinder its ability to retain clients. For those with long memories, Trapnell points back to the implementation of the Financial Services Reform Act in 2004 as the start of the rise of the technical specialist to the detriment of the life insurance salesperson.

“Since that time, the concentration has been so much on education, that we’re breeding an entire generation of advisers who believe it’s appropriate to bludgeon their clients into submission with facts and figures.  We’ve forgotten how to sell and how to talk to a client and remove those artificial barriers clients put up,” Trapnell said.

“When you start talking about retention of clients, if you are able to back up that emotional push with facts and figures, the chances of the policy going off the books are far less than if you’ve sold it purely on facts and figures.  People forget the facts and figures, but they don’t forget the emotions of why they bought the solution,” he said.

Spiteri sees retail life insurance as being uniquely placed to offer the best insurance advice solutions.

“If we consider the whole life insurance industry, there are three layers. There is direct insurance. It can be purchased over the phone, generally with no medicals. Then there are industry super funds and the insurance options that fall into that category. There are some good industry super insurance options that allow people to get insurance they won’t be able to get in the retail space.  And then you’ve got the top tier, which is the retail space we are in. Two of those tiers do not have retention strategies, but the retail space is where I think retention and the service level is our biggest differentiator from the whole insurance industry.  We’re the only ones that can service these clients on a personal level each year.  The other two options don’t look at the next steps clients may need to take,” Spiteri said.

Yet this is not always the case, Spiteri added, even for advisers who are willing to engage with clients that may not have heard from an adviser in a number of years. He points to advisers purchasing books of business that are so old the policies can’t be modified so they become difficult to service, even when clients fall away, and require extra time and effort to rekindle any form of adviser and client relationship.

Hale agreed with the view that these books of business can be hard to reactivate and mentioned that past purchases of books of business often came complete with file notes which indicated clients were not engaging with advice despite having purchased a policy many years earlier. Here he called for more exchange of information between advisers and insurers around contact with the client and any reasons for disengaging from their policies or advice. Hale said that as an adviser he remains unsure if this type of work is taking place and whether an insurer has been in contact with a client before their name appears on a list of lapsed policies.

Speaking from a life insurer perspective, AIA Australia’s Chief Retail Insurance Officer, Pina Sciarrone agreed that insurers, licensees and advisers had to be in partnership when engaging and retaining clients and encouraged advisers to consider how to engage clients on a regular basis.

“An adviser needs to be thinking about how they are engaging with a client throughout the year. It’s also about appealing to how the client wants to be engaged with?  Some of them might not want a phone call from the adviser, or from the insurer. Maybe they want another way of staying in contact with what they’ve got, or with the adviser or with the solutions they have in place,” Sciarrone said.

Pointing to AIA Australia’s wellness program Vitality, Sciarrone said AIA Australia can engage with a client from five times to 20 times a month, which is giving clients more contact with their insurance product, AIA Australia and their adviser, and has boosted retention rates by more than 40 per cent when Vitality is attached to a policy.

“What that’s telling us is that Vitality is giving the client another reason to retain their insurance product. They can see it makes sense to be educated  about their health and changing their behaviour. Vitality helps clients learn about their health, rewards them along the way as they get healthier, while reducing their insurance premium,” Sciarrone said.

Sciarrone also said advisers, licensees and insurers could share data to assist with retention, with AIA Australia now providing demographic based propensity modelling to help advisers retain clients.

there’s just too little of those stories that get out there

Trapnell has also seen the correlation between regular client engagement from insurers and lower lapse rates reporting where insurers are taking a pro-active approach and contacting clients well before renewal.

“A number of insurance companies are very proactive in getting their team call the client, and this has seen a dramatic drop in the lapse rate. They do allow the adviser to opt out of that telephone service, but I don’t think any advisers opt out, because the life company people they get on the phone are well trained and they do a good job.”

Trapnell noted, however, that this behaviour is inconsistent. “Those companies that don’t do anything –  we can see it in our figures, because we get these monthly reports looking for any potential hazards in there,” Trapnell said.

Sourcing new clientsBack to top

In the natural order of business, the retention of clients follows the previous step of sourcing and securing them. Research shows that only around one in five people seek financial advice, so how does the advice sector, in conjunction with insurers, engage with more people?

Spiteri considers this as a challenge the entire advice sector needs to embrace by highlighting the level of claims that are paid out and the services provided to people who are on claim. He questions why insurers, licensees, advisers and industry associations have not banded together to do so. At the same time, he is appreciative of the efforts of insurers to make writing new business easier for advisers.

“Why don’t we do a campaign on what we’ve done? I just got a $1.2 million claim paid out on an accidental injury benefit but there’s just too little of those stories that get out there. We need to highlight the rehabilitation work we’ve done with this person.  It’s not about just paying somebody, but what else we have done and how have we helped them get back in the workforce. That’s the biggest difference that I think people around this room can do, as opposed to other areas of receiving insurance,” Spiteri said.

no one wants to face their own mortality

Sciarrone said AIA Australia has recently formed a partnership with Evo Media Group to deliver claims testimonials including one of an eight-year-old girl with leukemia who was covered by a Family Protection Benefit paying $120,000 to the family. “That gave the mother the ability to leave her work for a year and just take care of her daughter, because that’s all you want to worry about really in this situation.  It’s stories like that that we need to get out there.  The mother said ‘We were the only people in the ward that had Family Protection Benefit. No one else understood it or had heard about it’.”

Trapnell, however, is wary of stories that he refers to as ‘backing up the ambulance and frightening people with statistics’ as “…it forces the consumer to face their own mortality, and no one wants to face their own mortality.”

He said Synchron representatives had travelled to the UK and found that life insurance marketing over there promoted the positive aspects, including the emotions, of securing cover, and generally favours campaigns which do not mention claims, in favour of presenting insurance as a lifestyle protector.

“I don’t think claim stories, while they’re important to have when you want to back the evidence up, are the ‘be all and end all’ of increasing market awareness of life insurance products and advice. That type of awareness comes from several areas, including relationships, and we communicate and connect with people on a relationship level which is the first way of getting new business and then moving that relationship from tribe to tribe. Born again Christians, recent non-smokers and people who have just purchased life insurance have got something in common – they want to tell people about it,” Trapnell said.

He added that advertising was not a primary source of new business but was a backup to a relationship and created awareness because, even direct life insurance advertisements addressed the issue of protecting family, which was not something that claim statistics could address in the sales process.

Leveraging new channelsBack to top

For Dawes and Hale, these two approaches to gaining new clients – present a negative outcome and show a solution or demonstrate a need and provide a benefit – still require someone to tell the stories and narratives that go with these approaches. For Hale, the new channels offered by digital marketing allow him to send a story to many people at the same time.

He regards the new channels are people being on their phones, Google reviews, Instagram posts and ratings websites, but is uncertain if fellow advisers have begun to invest in these channels, which work well with promoting the advice relationship as well as the claims statistics.

“Don spoke about transferring the relationship from one person to the next. I’m only going to be able to see so many people, but you put a message down on paper or through a phone a lot of other people can read it. The message has got to be really easy for people to understand because with social media, it’s one-to-many. Client referrals are generally one-to-one.  All the client referrals I get, I might have one client that refers lots, but it’s always a one-to-one,” Hale said.

Dawes has a personal connection with needing to pass on the narrative of life insurance and advice, which stems back to when his father passed away from a heart attack, ten days before his 21st birthday.

“How I wish that he’d met Matt or David, or me, or Don – someone like us, before that occurred. But he didn’t. Financially, we were okay, but I could see over the last 24 years there would have been a significant difference to my mum if someone like us had been there at that time and provided some advice. In terms of what we do, we care, and we want to help people. When you’re sitting with people, I think about that stuff and you just want to make sure that they’re being looked after,” Dawes said.

He admitted that while he was a relative newcomer to digital channels and social media, he recognised that poor messages were not improved, but were amplified, by these channels and likened it to the inputs and outputs of computer systems.

“If you put rubbish in, rubbish comes out. If you put rubbish out, it’s to everyone in the room, because you’ve got the capacity to do that through social media and it’s not going to make an impact. In fact, it could do the reverse. It’s really important to get the message right and it’s the things around what we’re talking about here, and the impact that it has on families,” he said.

Sciarrone also saw the need to remain relevant in the messaging that goes out from advisers and insurers saying this was the only way to get consumers to engage with the life insurance advice sector and to get them thinking about what is important to them.

“The research, in terms of what’s important to people, boils down to three things: protecting their relationships, their health and their wealth. So, what are we doing to protect those three areas and how are we talking to people about what we are doing and ensuring we are relevant? We asked ourselves these questions and the outcome was the development of our new client value proposition -is  life, health, and wellness with the client at the centre of what we do,” Sciarrone said.

“Remaining relevant was one of the reasons we launched into health – not just with Vitality, our health and wellbeing program, but also with our new health insurance license and  product myOwn Health because we know that protecting one’s health is important to people. Advisers are also looking at opportunities to be more relevant to people, so they’re thinking about what they should be adding to their client value propositions to become more relevant to consumers and their clients,” she said.

Life insurance product affordability/sustainabilityBack to top

Product has also become part of the retention strategy discussion and without it the financial advice sector would be unable to function. Recent developments around level premium products have highlighted the issues relating to yearly stepped premium products. Earlier this year, AIA Australia partnered with Synchron, to create a fixed term level product which provides some predictability of what the premium will be for either the five, ten or 15 year terms within the product.

a fixed term level product, where you’re selecting shorter terms and catering to more specific needs, is probably the way to go

“Ideally the product that an individual should be purchasing, when you look at the length of time people are going to need insurance, is a level premium product.  There can sometimes be an obstacle around affordability for level premium, so a fixed term level product, where you’re selecting shorter terms and catering to more specific needs, is probably the way to go,” Sciarrone said.

“My concern is why is level or fixed term level not being sold even more, and not being promoted even more; these products  can address retention issues. Product is a real key here, and we need to think about not just the client getting insurance for today, but consider that client retaining insurance for tomorrow, for the next five years or the next ten years, for the term of the time that they have,” she added.

Unsurprisingly, Trapnell is a big fan of the AIA Australia developed term-level product seeing it as addressing a drift away from level premium products that begun in the late 70s and early 80s. Referring to his UK visit, Trapnell said that 60 per cent of all life insurance in that market was sold off the back of home mortgages and it was all on a level premium basis, with the average life of a policy in the UK being longer than ten years.

He asked, “Can you imagine how sustainable our life insurance companies would be in Australia today if we could say to them we will deliver a product that gives you, on average, ten years of growth; ten years of regular revenue? We spoke to a senior figure at the UK corporate regulator and his comment to me was, ‘…We find it amazing that in Australia you seem to have life insurance that’s designed not to be in force at the time a claim is most likely to occur’.”

Given the dominance of yearly renewable premiums in Australia, Trapnell sees a need to find a way to move people across to level premiums, which typically have a buy-in that is about two and a half times that of the yearly renewable stepped premiums. He said the solution was to find a different way to get the buy-in, which he said AIA Australia achieved with its Optimum product. This allows a client to buy-in to a level premium environment gradually, using a stepped premium that is slightly above a normal stepped premium until it gets to the level premium basis and remains level from that time on.

“We don’t think term level is the panacea of all evils in the industry. We just think it’s an alternative. It’s a way for a client to buy-in into that level environment. It also means life insurance companies can no longer say we have a sustainability issue because policies are staying on the books for longer. Our corporate regulator can no longer plead about our ‘culture of churn’ because you can’t churn a level premium product, and of all the ills that came out of ASIC Report 413, virtually every one of them disappears under a level premium environment,” Trapnell said.

Hale, who has written level premium business with clients, says it was done with a warning to clients and he expects future level premium products may carry a warning for advisers as the industry readjusts to their re-emerging presence in the market.

“We’ve got lots of clients that we wrote with an insurer on level premium over a long period of time and we’ve seen some serious relationships develop from that business. At the time, we spoke about it not being true level, but continued to offer it because we knew that if the level premium is going up, the stepped premium is going up by even more. The goal posts, in general, have been dramatically changed and I can’t say to people any more, that level premiums are going to provide the glorious outcomes that we were told that it would,” Hale said.

“There are some great things around these new sustainable products, such as term level and IP without all the bells and whistles. But there’s also a worry that you’re going to get caught out from a compliance point of view. With a heavy reliance on the current ratings systems (like risk researcher) for replacement of business, there might be flow-on effects from a compliance point of view,” Hale added.

Responding to Hale, Sciarrone said, in terms of the term level proposition, AIA Australia clients would be able to choose another term or default to a discounted stepped premium but hoped advisers would be having these kinds of discussions with their clients before the end of the term.

Wrapping Up

In wrapping up, each participant holds an optimistic view of the future of financial advice. In some cases, though, this view is optimism tempered with the need to make more changes that will continue to benefit clients and advisers. Among these changes is wrestling the industry reputation back from its detractors and letting positive engagement with clients become the image people have of life insurance and financial advice.

Spiteri sees opportunity for the advice sector by engaging with clients in new ways and specialist services.

“Some of the opportunities are jobs that haven’t been created and are probably being performed today by lawyers and solicitors. We pay so many claims and we get involved in so many claims, but we don’t highlight it and we virtually charge nothing.  Why don’t we become claims specialists and charge a minimum fee?  That’s one way of retaining your clients – one way of engaging new clients,” Spiteri said.

“I also believe insurance, as it has been perceived for the last 30 years, is a need; not a want. A ‘want’ for a lot of clients is putting together their superannuation and then taking on insurance on the back of it. The biggest change, and the greatest thing that’s happened in our industry in my 30 years, is that the objection by clients that they can’t afford the insurance is no longer there, with the benefit now available to them of being able to package life insurance through superannuation,” he added.

Picking up on this point Hale says the future will require advisers, licensees and insurers to continue to show why life insurance is an important part of people’s financial landscape, instead of producing product pitches.

“Life insurance is a grudge purchase, and I think we need to increase education around being able to connect that need. That is where licensees, insurers and advice businesses need to take the baton and run with more training on the soft skills. Everyone wants to get ticked off for CPD points, but quality advice is helping our clients so they understand it. That’s where you separate the okay businesses from the great ones,” Hale said.

Trapnell would also like to see a return to the basics of selling life insurance and has seen the rise of a generation of advisers which he described earlier as believing it’s appropriate to bludgeon clients into submission with facts and figures.

“I can’t see any positive consumer outcomes in any of the regulatory changes that we’ve seen since 2002. We’ve got fewer advisers coming through to give advice, the penetration life insurance companies are getting in the market place is lowering and we’ve got 80 per cent of adult consumers not engaging.  So, where’s the consumer outcomes?  We need to get back to the basic grass roots – back to the soft skills and back to removing the barriers that people put in the way of obtaining life insurance advice,” Trapnell said.

Taking an external view, Dawes called for the advice sector to keep on improving and for Government and consumer groups to end their barrage of criticism.

“We need to stop the bashing by the Government and the consumer groups. We are here for the consumers, and we’re all consumers as well,” he said, continuing “I also agree with Don around the improvements on the back of legislating change, and having conversations with Government in terms of those improvements,” Dawes said.

“As an industry, we still need to be very mindful of continuing to raise the bar around our standards, around the education for connecting with people and getting that message through.  And probably the biggest thing for the industry is that we need to just get on with it. We’re at a point where the legislation is what it is, but we still need to continue to improve. Otherwise we’re going to get buried and distracted and won’t be helping the people who need to be helped,” he added.

Sciarrone also regarded the future landscape of the life insurance sector as a new reality that will affect everyone.

“The landscape is what the landscape is, but we need to get on with it. It may be just a different way of doing business, and that’s not a bad thing at all as long as we embrace what clients want and how they want to engage with insurance. Rather than criticising what’s changing, let’s ask what role we should be playing,” Sciarrone said.

Sciarrone added, “we should be focussed on how we engage with clients better. How do we become much more relevant? How do we deepen those relationships?  What do we need to do from an insurer, licensee and adviser perspective, to engage with clients much more easily and more regularly? If we do so the outcome is going to be positive and we get a win-win-win situation for the end client, for the insurer and the adviser.  So, client engagement is one critical issue that I would leave with everyone, and whether we’re doing enough from a product perspective, advice perspective and ongoing service perspective.”

  • Jeremy Wright

    Great article and well articulated viewpoints.

    The question my Business is going to be asking all the Life Companies and will be an important factor as to whom we support from January 2018, is will you be providing a 2 year premium guarantee, as premium increases, are by far, the major reason for clients lapsing their covers.

    No-one today will accept double digit premium increases, when their incomes are lucky to rise by 3%

    The Life Industry needs to understand this and it must make changes to the way premium rises are pushed onto clients.

    Our research continues to show, that clients today, will not hesitate to look at alternatives if they feel they are getting gouged and it does not matter to them that the Life Company pays a lot in claims, what they focus on, is their diminishing budget.

    The only way the retail Life Industry can continue in the future to provide quality products in what is a very competitive environment, where every man and his dog now sells Life and disability products, is to write more Business and minimise premium rises to loyal existing clients, which will help with retention and increase profitability.

    The current path is unsustainable.

    The standard ploy of increasing premiums on existing clients to offset lapses, is self defeating.

    Statistically, there will always be a portion of the population who will need to claim. That will never change.

    The only way to offset claims, is to write more New Business and retain existing clients.

    That is the real issue and should not be clouded over with theoretical analysis that creates confusion and leads to more ridiculous regulation, based on mis-truths and lies, perpetrated by self interest groups, whose only concern is to themselves.

  • Stephen Dingjan

    Rataj, you should try LifeRisk Online, we do the quotes as part of the premium comparisons and save these into your life company adviser account for use with digital applications etc