Wednesday, April 06, 2011

FSC Life Insurance Conference, Sydney 6 April 2011

Bruce Madden attended the FSC Life Insurance Conference held in Sydney today on behalf of BlueChip Communication


The Financial Services Council’s second annual conference dedicated to its life insurance members kicked off in Sydney today with some big numbers.


Suncorp’s CEO Geoff Summerhayes reminded us that the financial services sector now accounts for some 11% of our national economy, with plenty of upside for the industry in the downside story that is our nation’s lingering underinsurance problem.


With figures ranging between $1.4 and $1.7 trillion, the magnitude of the underinsurance problem is stark. Or, put in the context of another large number, the industry has before it an untapped market representing some 96% of the Australian population with dependent children who currently have zero or inadequate risk cover.


The big consumer challenges to overcome? Summerhayes suggests three: accessibility, affordability and trust. In other words, make it easy for Joe or Jane public to get hold of an insurance product, make it stack up for them in the hip pocket nerve, and prove that any genuine policy claims will be paid, simple.


Of course, this will be no easy feat, given the current focus of government and its multiple reform agenda which, as Summerhayes eloquently put: “is providing our industry with tailwinds, crosswinds and headwinds all at once”.


Buffeted by all this wind, the man from AMP Craig Mellor made the suggestion that the direct market for life insurance will arrive somewhere around 10% to 20%, driven largely by the savvy consumer with a mindset of “instant gratification”. So expect more internet distribution, online transacting and ‘instant conversation’ taking place.


One of the big questions facing the distribution thinkers in the industry is the impact of the upcoming FOFA (Future of Financial Advice) reforms, expected to be announced by Minister Bill Shorten just prior to Easter.


Few are expecting a swag of treats from the Minister, but all hope for sensible clarity around the contentious issues of commission payments in risk, volume bonuses in investment products, the opt-in proposal for advice in super and the fiduciary obligations of advisers to act in the best interest of the client.


This mixed bag of policy issues is proving a collective regulatory hot item – with much last minute discussion taking place in the halls of Canberra. Dangerous portents abound.  If the experience of UK-based Maggie Craig (she is acting head of the Association of British Insurers) then we can look forward to deeper government intervention leading to poor consumer outcomes, even worse standards of underinsurance!


Ms Craig reported to delegates that the expected outcomes of moves in Britain to ban commission payments from 2012 will result in fewer advisers (many will simply leave), more expensive advice for consumers, and a large gap between the full advice and execution only segments.


The ABI is lobbying hard to find an automated ‘simple advice’ solution to fill this middle ground, and, somewhat ironically, foresees the return of tied agents and bancassurance advice to help fill the gap!


If this all sounds like a turgid return to the future scenario you are right. Or, as one delegate put it: a timely reminder that our pain here in Australia is bad, but nothing quite like the torture – including the decree of the European Court of Justice to abolish gender specific pricing on insurance products – that is being endured by our British cousins.

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