Having confidence – belief – in your offering is a vital foundation of success. In the context of life insurance advice, this means having confidence in the inherent value of both the advice you are providing and the product solutions you recommend as part of that advice.
Whilst the life insurance sector has seen much consolidation, there has been no shortage of new entrants eager to take their place. This means the sector remains ultra-competitive and there is a proliferation of new products. The 2021 IDII changes, in response to APRA’s intervention, mean that advisers also need to know their way around legacy contracts as well as contemporary product offerings, and the differences between them (another area where risk research software can prove invaluable).
Claim time is the absolute moment of truth for life insurance and life insurance advice. It is the time when life insurers honour the promise made by the adviser.
Notwithstanding minor variations from time to time, advisers can be confident that the vast majority of retail insurers pay claims at a very high rate, and that advised policies have a much higher rate of claims success than unadvised.
APRA and ASIC (through their Money Smart site) issue regular updates on claims rates that demonstrate the differences between products, channels, and insurers.
Aside from being a useful resource to compare insurers, they can also instil extra confidence in clients that their cover will be there when it matters most (a major value -add of life insurance advice). Table 4 below is an example of this data, showing death claims on retail advised policies. By way of comparison, the average acceptance rate for direct life policies over the same period is 91.5%, compared to the 96.6% average for retail policies and 87.4% for directly written accidental death policies.
The nature of life insurance, and its position within the financial planning pyramid, described above, opens up a wide range of opportunities in related offerings, creating new sources of revenue.
Sharing the base of the pyramid with risk management is cash flow management, and there is a natural nexus between life insurance and cash flow management. Not only are they both important for younger clients – at the beginning of their wealth accumulation journey – but they are also interdependent on one another, with the affordability of cover over the longer term being crucial, and indeed something that advisers are obliged to demonstrate and document.
Cash flow modelling software has multiple applications and is used by advisers offering cash flow and budget management as part of their advice offering, as well as by those offering life insurance advice who need to do 10-year budget projections to verify the affordability of cover over the longer term. Tim Henry, of Aspire Planning, makes MyProsperity mandatory for all his clients, whether that be the free version or the advanced version (which carries a small subscription fee).
Beyond the assistance of existing clients at claim time (which most advisers see as a vital and highly satisfying part of their role) the articulation of Claims Advocacy as a specific, standalone component of the advice offering opens up the opportunity to (a) provide such a service to new clients, and (b) charge fees for such a service.
Happily, we are starting to see the emergence of Claims Advocacy firms from within the financial advice profession, with a growing number of financial advisers incorporating Claims Advocacy into their service offering, some even going so far as to establish standalone businesses.
“For more complex claims I absolutely charge a fee. At the moment I am helping a client with a big and complex income protection claim. There’s a lot of ongoing work so I have charged a claims concierge fee of $5,500. The client was happy with that because they recognise the amount of work it’s taking, and because the value they stand to get back is tenfold or more in terms of the claimable benefit. Other times I may charge an hourly rate or tap into the Financial Planning Benefit of $2 -$3,000 that many policies now include”
Estate planning has a strong relationship to life insurance, which is why many risk specialists also incorporate this service into their practice offerings (either directly or via referral).
It is worth remembering that not all aspects of estate planning require the involvement of a legal professional. Furthermore, whilst only qualified legal professionals may be able to execute certain documents, financial advisers are generally far better qualified to help clients make the actual decisions that are being codified in those documents. This is because the financial adviser generally has a far more holistic understanding of the client’s family and financial situation, and also because most lawyers are not qualified nor experienced to deal with the vast range of estate planning issues that planners often see within their clients’ affairs. One example might be the navigation of superannuation death benefits post the 2017 reforms , particularly with SMSFs with pension and accumulation balances. Other areas where many lawyers lack experience and expertise include Centrelink, aged care, and taxation issues arising on death.
Life insurance is often used by business clients in business succession arrangements for partnerships, SMEs, and family businesses. This can be lucrative area to become involved in, as the sums insured are generally higher and business clients are generally more willing and able to pay fees for the advice.
A further opportunity for those advisers who decide to strengthen their risk credentials is to partner with those advisers who choose to outsource life insurance advice.
At the beginning of 2020, Phil Thompson changed his business from a full-service advice practice Thompson Financial Services to a Risk Specialist offer Skye.com.au
Aside from this narrower focus seeing his traction with referral sources increase, there have been client and efficiency benefits too.
“Niching is scary, I have wanted to do it for a long time and have avoided it because it means you need to say no to people. To complicate matters you may be dealing with referral partners who send you a broad range of clients that now don’t fit your new niche. On top of those niching side effects, I also had a number of existing clients that didn’t necessarily align with my new model. I was worried I was self-sabotaging a great business with happy customers that I’d invested years into building.”
“My business grew almost 250% during 2020 and getting specific on what advice I was providing and for who, was a significant contributor to that uplift. Ironically, narrowing my scope generated a high level of ideal new clients and efficiency.”
More new clients came my way because what I did was easier for referral partners to articulate – I could get very clear on the problem I could help them, and their clients solve.
There are also a whole bunch of process efficiencies and enhancements that I could capture through doing a narrower range of services. When your offer is broad your often freestyling, there’s a new process pathway for almost every ‘unique’ client type. My team and I have found we can only optimise and automate the things we repeat. I also think that the equation has flow-on benefits for our customer experience. The proposition of Skye is to simplify the insurance chore for our clients, the clients who we aim to resonate with are female millennials. We found because we delivered to our proposition succinctly every time, inner circle referrals increased. When we were dabbling in a broader range of services it was much more difficult to ensure our processes upheld the experience we wanted to deliver – it just wasn’t sleek.