December 8, 2021

IDII Series #5 – Transcript

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IDII Series

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Fraser Jack
Welcome back. Katherine.

Katherine Hayes
Good to be back.

Fraser Jack
We are talking about the future, where to from here. Tell us about? What are your thoughts on where we’re at now and where we’re heading?

Katherine Hayes
Well, I feel like, obviously, we’ve had so much legislative change. We’ve had all these product changes. I feel like we’re in the middle of it, I think was it a good way to go, we had our loss of agreed value, much 2020. We’ve had these IDI changes October this year. But we’ve still got the upper changes to the five year renewal contract term schedule for next year. So timeline wise, I feel we’re in the middle of the mixed. But obviously, all the insurers have come out they’ve got their offers on the market. I think everybody’s looking and peeking into everybody else’s PDS. So I actually expect to see a little bit of copycats, and adjustments, especially if some of the insurers that see some new business drop off as a result of, you know, not being as competitive as their fellow insurer.

Fraser Jack
Yeah, I think, I think you’re absolutely right, I feel like there’s the the water levels, it’s like a little choppy ocean at the moment, there’s a lot of water up and down, and there’ll be they’ll start to settle down where people will sort of end up bringing their products closer. So that means I guess a little bit more disruption for advisors, then as products change?

Katherine Hayes
Absolutely, I think you’re gonna have to allow quite a significant amount of time to familiarize with the changes that have happened to date, but also be quite cognizant of the changes that will inevitably come out over the next six to 12 months. And then of course, then we’ve got that five year contract term.

Fraser Jack
So tell us about that. Tell us what your thoughts are in the five year contract term how that was?

Katherine Hayes
I think that’s fraught with danger. Administratively, I don’t see how it can be achieved. I honestly believe that the intent of it is to ensure the sustainability of our industry, I think the changes that we’ve just been through, we’ll do the majority of that. You know, so that five year contract term, I do think it’s largely unnecessary and the risks, the risks absolutely outweigh the benefits. I some of the things I’ve spoken about on the task forces I’m significantly have significant concerns around working parents. Because we all know that home Judis is not an insurable occupation. So if a five year renewable term comes up while someone’s on parental leave, the intention is that you’re not supposed to have a loss of cover, because of medical reasons. Only occupational and pastime changes, but it’s a temporary situation. So you could have a parent who has lost their covers because it renews in that timeframe. And then when they go to get that cover back, it’s likely because pregnancy is pretty tough on the body. That there will be they when they do get that cover back. It’ll be on potentially with exclusions. So it’s failed that test have not supposed to have a detrimental impact on the medical reinsurer ability. So there’s issues like that that have to be played out, then you’ve got the debate of if it’s a new contract, does New Business Conditions apply? That’s going to get expensive from the for the insurers if that’s the case, I understand that I think they’re going at getting legal opinions on that one at the moment. And then there’s the whole having the appropriate IT systems in the background to be able to administer those changes, and what is the role of the advisor and all of that?

Fraser Jack
So many unanswered questions? You put it that way?

Katherine Hayes
Yes, a significant unanswered questions. So but that would make it more akin to the group space, but with an individual underlay because at the moment, when the group insurers go out and do that they just put out to tender. And you don’t really get a say in the matter. So there’s some similarities to that. But of course, you’ve got the individual assessment and individual adjustments being made. That adds a lot of energy, cost, and cost. But that’s just drive prices up. That’s the opposite of sustainable.

Fraser Jack
And now we’ve, we we’ve seen you mentioned from one of the earlier episodes, we talked about the concept of you know, in the health insurance industry, for example, episode, you know, once a year they approve premiums and pricing. And do you see that could be something that I step in and look at with

Katherine Hayes
no, they’ve made it really clear that they’re not a pricing regulator. So that’s not something that they they want to dabble in, even when there’s been complaints about some of the insurers having excessive upfront discounting programs. They’ve said, Look, we don’t actually think that’s an issue, despite most advisors saying, Look, if you’re putting a discount on a policy or a product that is known to be unsustainable, how can that be meeting expectations of what you think APRA would expect, but they’ve just simply wash the hands of it so so I can’t see them stepping in to look at the adequacy of premium increases or the approach In the future, but what I am hoping to see is that they will start to track the rate of change for premium increases. But that will be quite difficult because as we know, it’s not just the same rate for everyone across the board. It’s applied based on gender occupation, where you live, makes it quite difficult to track.

Fraser Jack
What are your thoughts on premiums moving forward, both old products and new

Katherine Hayes
products? Well, the old products, I think we’re going to see those those premium increase, it’s going to happen, the new products, I think we’ll see adjustments as far as insurers adjusting their products to find where they sit in the market. But there is always going to be that extra emphasis on making sure that cover is sustainable. So I’m less concerned about the new products. But you know, it would be foolish to think that there wouldn’t be pricing adjustments.

Fraser Jack
And what about Commission’s moving forward? What are your thoughts on what that might look like in the future?

Katherine Hayes
Yeah, I don’t have any I don’t have any fear about Commission’s being removed from the industry. I think that the early outcomes of ethics review shows that there has been improvement in the quality of advice. We’ve also seen comments from the opposition talking about they’re starting to soften their view and understanding having reference to the overseas models, that it does seem to have a place but they’re quite cautious with those remarks. So I think that given that I’m not planning to adjust my business model for the loss of commissions. So I’m not too worried about that.

Fraser Jack
The previous episode, we touched on advice, affordability, in risk moving forward, what are your thoughts that we’re going to start seeing non advised products kick in the robot type stuff? If one ability

Katherine Hayes
Yeah, I have mixed feelings about this one. Because at the end of the day, one thing that helps makes insurance affordable is having enough lighters in the pool. So you kind of want to get as many people in, which takes multiple channels, whether it’s direct, whether it’s group, whether it’s advised, or, you know, general advice, which is that sort of gray space, which everyone’s trying to work out where, where it fits and how compliant and how to do that. And without actually stepping into personal advice. So that’s, that’s quite tricky. So as far as that goes, the more lives that are there, the better. So that means there should be more channels open. But as long as it’s done with the right knowledge behind it, you know, the clients being fully aware of buyer beware. Versus Yeah, it’s, it’s just a minefield on that front.

Fraser Jack
Talk to me about the concept of risk specialist. Because this has moved. We’ve seen obviously, it’s been the term has been around for a long time. But is this something now and as we moved through the future, is his risk specialist going to become even more so holistic advisors want to do risk in the middle that were referred off? What are your thoughts?

Katherine Hayes
Yes, that’s my prediction. In a nutshell, I think that we’re definitely going to see the rise of the risk specialist. It’s interesting, I was looking at came across some data, which was saying that, while there are many advisors that write risk, I think it was an NMg report that indicated that there was only about 400 risk specialists, where the price across Australia so out of all the advisors, there are a lot that touch risk, but not many that specialize. So it will be interesting, I don’t know what the demographic is of those advisors to see what happens over so up to 2026. With the education side of things, what happens there, so but what I am seeing is more advisors who dabble in risk are moving away from it, they’re recognizing that the complexities are there, the remuneration is down. And unless you’re doing it day in, day out, it’s quite difficult to be on top of it. So it the the downside risk far outweighs the benefit. So definitely seeing more advisors step away. But I have seen the alternative where some generalists have gone, if I want to do risk, I’m going to just do risk now. So I’m seeing that as well. But usually it’s it’s more the people exiting the risk space. But I think the real danger is that, given the low entrance to our industry, unless you’ve got unless you’ve got full practice advisors, which become risk specialists, it will take a really long time because if someone’s gonna go study a degree in financial planning, I can’t see them in a position where they’re going to go, let’s just focus on insurance after studying everything else. So I think it will take a long time for number three to recover.

Fraser Jack
Interesting, so we need the risk specialist but it’s gonna be hard to find them.

Katherine Hayes
Correct. So that’s good if you’re a risk specialist, and you can do it well.

Fraser Jack
There’s definitely some supply and demand equation to be spoken about the big picture looking out disruptors, you know, the big the big tech companies, the the Facebook’s Amazons of the world, how do you see them playing a role in the future of risk?

Katherine Hayes
Oh, look big going to I would Actually optimistically say, I hope they do break some ground. Because I would rather have someone with a really a big business with a big budget, break the ground on how to master you know, say for example, general advice and have them put their butt in the fire, and make all the mistakes, to allow, you know, the rest of us to learn the lessons of what not to do before dabbling in that space. So, you know, I don’t think it’s a bad thing. I think we need more people seeing life insurance or protecting your loved ones is as normal. And if it takes a couple of big corporations to throw money into getting that message out there, then that’s, that’s, that’s a good thing. It’s like those are horrible. Life insurance as on daytime TV. It’s like, I hate those products. But I like that they make people think about it. Like that. So it’s pick your battles and focus on how you can use it to your advantage.

Fraser Jack
Wonderful. Catherine, thanks so much for coming on and chatting to us all about the the IDI changes. How can people get hold a hold of you if they want to continue the conversation?

Katherine Hayes
Yeah, absolutely. So people can always shoot me an email, which is just the letters at kh, my initials@hcis.com to let you or you can head to my website. I actually have a Calendly plugin there if you want to book in a zoom phone or other catch up, which is just hcis.com.au.

Fraser Jack
Thank you. Welcome back, Jeff.

Jeff Thurecht
Thanks, Fraser. Good to be here for the final final one and look towards the future.

Fraser Jack
Yeah, great. I’m looking forward to as well. So thank you for joining us for the entire series, actually. But look, we are talking about the future in this one. You know, we’ve had the changes come into effect. We have some certainty around what it kind of looks like. But as we move forward, there’s still a lot of uncertainty, I guess.

Jeff Thurecht
Yeah, there is definitely. We’re still getting our head around the you know, the new products and how that impacts on existing books and for new clients. And yeah, I guess we’re expecting changes in those products, as well as the insurers realize where they’re sort of sitting with their competitors. And so yes, still a fair bit of uncertainty. And I think, you know, a little bit of cynicism from advisors. And I’m no different in that. We’re talking about sustainability. And that’s why we made these changes. But you know, have they got it right? Are the products going to be sustainable? Or are we going to be having the same conversations in five years time? And in 10 years time, I might not be here. But you know, five years time, hopefully, we’re not having the same conversations.

Fraser Jack
Yep. So So obviously, the new products have launched, they’re all very different. It’s not like we have different different flavors of vanilla on the market anymore. We’ve got a whole lot of different varieties to choose from. Do you think over time, though, there will be a more of a coming back to the middle and those products? And maybe if if something’s working really well, then the other insurers will then jump on that as well. And similar products?

Jeff Thurecht
Probably? I don’t know, that’s necessarily a good thing. But I think probably it will, I guess there may be an element of with a small audience of specialist advisors who are doing potentially more business, maybe there’s an ability to be a bit more nation focus on what what do we do really well, and work with advisors who support that philosophy, as we touched a little bit on in that previous episode, it might be a case of certain product providers coming out with products, which suit certain styles of sort of certain philosophies. But I think unfortunately, the way the compliance regime is built, it’s it’s got to be based on, you know, how do you how do you support your view of best interest? And yeah, comparisons is a tool that you’re doing there. And if they’re so far apart, you can’t compare it to anything. And that makes it quite hard to back that up. And, you know, compliance teams and lawyers will get nervous about that. So insurance, insurers may be forced to sort of come back towards the middle a little

Fraser Jack
bit. Do what are your thoughts on speaking of comparisons? What are your thoughts on the comparison software? Do you think that’s going to become less important in the role over time,

Jeff Thurecht
right now, it’s largely irrelevant to us in the income protection space, because they are so different, it’s so hard to just get an easy, you know, line up across them. And when we’re taking the time to learn more indeed, deeper into the, I guess, the underlying products. I think research specialists probably do that more consistently anyway. And therefore they rely less on the research houses, it’s more the advisors who are doing, you know, one case a month or the occasional client, where they don’t have that time or energy or expertise necessarily to go that deep on the products where they have to rely on the research houses. So I think, you know, in that space, still gonna have the same role to play I think in the specialist space, which as we talked about, is narrowed and narrower and deeper, potentially becomes less, less important in As I said in the short term for us, it’s almost irrelevant because the research has us can’t line up those products as they used to.

Fraser Jack
And do you think the, as you mentioned are specialists? And we you sort of touched on in the previous episode with some of the stats around that. But do you think there are specialists will know, so great or split off over the next few years and, and become a complete specialty?

Jeff Thurecht
I think it is, is already to a degree. I think some people don’t really well, I mean, we appointed in our business, a risk specialist earlier in the year, and he’s fantastic. Dom’s doing a great job. And, yeah, I’m really glad he’s here with all these changes going through. And that was a choice we made. So I think there can be opportunities for businesses to bring that within their team. But there are also I know, some really great risk specialist businesses out there. And I think, to do it properly, you need to have that extra time and energy and resource available.

Fraser Jack
And obviously commissions has been a big part of of insurance over, you know, over the over its history lifetime. Or you could say, moving forward, though, obviously, we’ve seen some reductions in the past. But moving forward, how do you what do you thoughts on commissions? Well, is it going to be something that, you know, future governments might rule out? Or what are your ideas?

Jeff Thurecht
That’s a challenging one, I think, you know, the light labor sort of flagged that they were not very keen on commissions, but they seem to soften their stance in recent months, which is good. And I don’t think they’re saying, Yeah, we’re all for it. But they’re saying we’re happy to happy to be convinced that it still makes sense. I think in the mind, it does make sense to maintain commissions. But I think we’ve also got to be mindful that we have had commissions forever. And we still have under insurance. And we still have, you know, challenges in this space. So Commission’s alone isn’t the answer. It’s not like just because if we, if we increase commissions, we’re gonna start a wonder insurance is kind of not the positioning. But I do think the nature of the insurance process is that, you know, it’s challenging if there isn’t success in getting the business in force for somebody to want to pay the fee that it might cost to get that business in force. And so a commission structure works well. Also for lower, you know, lower premiums and lower a client’s it’s a really important way of getting them into the pool and getting them covered as well. So I definitely believe there’s a role for Commission’s to be paid to play. And I think, you know, government and regulators, in the main understand that it’s something they need to consider and keep keep on board, but I wouldn’t, you know, wouldn’t hang my hat on it.

Fraser Jack
Yeah, fair enough. It’s done. Usually, if anything, it’s kind of feels like commissions might have gone a bit low. I don’t know, what do you what are your thoughts?

Jeff Thurecht
Yeah, I think for the upfront, particularly, it’s really hard work to get insurance on the books. And, you know, a lot of them don’t actually go through these days or, you know, don’t get accepted. At the end of the day, so yeah, I think on that front, particularly, it’s gone a bit low. I think on the ongoing, it’s probably okay, because you’ve got some clients who need a lot of maintenance EDA, other clients who who don’t for you know, that first two or three years, once you’ve set it up, it’s kind of just checking in yet still pretty relevant. There’s a lot to be changed. So probably, you know, that evens itself out on an ongoing basis. But I think upfront, I think it’s gone too

Fraser Jack
low. You know, the I the first i and IDI stands for Individual, we haven’t sort of touched on group really, in this scenario, do you think group will insurance will end up with a similar following suit to individual?

Jeff Thurecht
Yeah, I think so. I think it’s already started. Yeah, the price increases that have gone through group insurance have pretty significant in recent times. You know, we don’t have a lot of exposure in that space. But you know, anecdotally, I understand they’re starting to feel the pressure. And it’s been a retail cover has stacked up very well against group cover, in many ways. In recent times, I think there might be some tension in that space. And for the next little while, while there’s new products, that sort of settling down. But I do think there will be changes in the group space, probably because they they’re going to be facing similar claims experience and sustainability issues. So there might be some advantages in group in the short term, but that’s not a long term. Substitute, I think, yeah.

Fraser Jack
And if we go if we go way out, and we start talking about the future, and, you know, getting right out into the concept of you know, what’s what will advice look like in 1015 20 years from now, the disruptive, the big technology companies that the Amazons and Facebook’s of the world that know a lot of data are around people or humans, you know, where are we going to be as a student advisors product? Or is it going to be a lot more individual non advised products?

Jeff Thurecht
I still think it’s insurances and advice product. I think there’s complicating factors I think there’s a role to be played for the unknown robos the right word, but you know, more technology driven options within within the space. So we’d like to see that improved, but but I would like to see that sort of improving in conjunction with advisors. So how can you make it a you know, process which the client can do certain level to themselves. And then if they want some advice, or they need to go the next level. And that’s, you know, I should have a similar view from an investment viewpoint in a sort of holistic advice viewpoint as well. But I think there’s some opportunities there where certain clients don’t necessarily need the detail level of expertise and understanding that an advisor who’s a specialist in this area, which I think is where we’re going to be heading, at least for the next five years, can bring to the table. But they do need some cover. And we can get started. And then they’ll get to a point in time where they want to have a conversation, and we can make that easier. That’d be great.

Fraser Jack
Brilliant. Thank you, Jeff, for coming on and chatting us chatting to us on the series, all things RDI, which is a pretty hot topic at the moment. If somebody wants to continue that conversation with you, what’s the best way they can find you

Jeff Thurecht
on LinkedIn, I tend to look at LinkedIn fairly regularly. So just look at my name Jeff direct, there’s not many theorists out there, so should be able to find me. Yeah, let’s look at least indirectly. So have a look there. Or look at MLS go and then shoot me an email through their website.

Fraser Jack
Wonderful. Thanks to you.

Jeff Thurecht
Thanks Fraser

Fraser Jack
Thank you for joining us, Natalie Cameron, in this final episode of our series,

Natalie Cameron
I really enjoyed having this chat Fraser. So thank you for inviting me back again.

Fraser Jack
No problem at all. Now, we were staring into a crystal ball and gazing into the future of what that could could hold, which of course means none of what we say could be correct. It’s all based on none of us based on past performance. But tell us about what your thoughts are with regards to let’s start with the the concept of insurance specialists, because it’s sort of becoming a very difficult field for a lot of sort of holistic advisors.

Natalie Cameron
So, so Fraser, by insurance specialists, you’re talking about people who focus solely on on risk, rather than sort of financial planning more broadly. So I’ve got that. Right. I think, you know, I, I personally have have seen some amazing advisors in action in the past, who are risk specialists, I’ve seen, you know, we always talk about the, the, the poor outcomes, you know, the the claims denied, or the, you know, the, you know, the products lapsed or or whatever it is we you know, we don’t talk nearly enough about the, the amazing outcomes, and that was sort of multitudes more frequent for me in my past roles than the negative outcomes. I think there’s personally, you know, I think there’s a, you know, a continuing and, you know, growing space for risk specialists. It is a really complex field. It is something that people need help with people need advice on. And I hope to see that that profession flourish in the in the future.

Fraser Jack
Exactly. And we’ve, you’ve mentioned before the tailored suit, I had to keep going back to this. But you mentioned before that that’s that’s certainly a skill. But you also mentioned the blanket concept. And it could be fair to say that when it comes to say advice, affordability, it’s not that, you know, we’ve just made things a little bit more complicated. So let’s let’s maybe make an assumption that advice, affordability is not coming down anytime soon. Unless, of course, we get something that can then help cover again, for think about the blanket, cover some of the the messes, obviously groups there. And in many ways, what do you think that we’ll see that happening, where there’ll be specific people getting advised or the tailored suit and other people getting the blanket?

Natalie Cameron
Well, I mean, I mean, my hope would be that more people can access advice. In the future, I think there should be so much more of it. You know, good advice. I think there’s a great need for it. And when I see, you know, Africa handles complaints about advisors, I’m not sure if you know that it’s less than 2% of our incoming complaints are against people who identify themselves as advisors. The vast majority of our complaints are against other financial firms that might be insurers and banks and superannuation funds, platform providers or all sorts of, you know, other financial firms. When I talk about advice in in the future, when you ask about, you know, is there a place for risk specialists? You know, I think there should be more advice, I think, you know, there’s lots of situations we see lots of complaints we see where I think had there been good advice. We wouldn’t be, we wouldn’t be receiving the complaint. So absolutely space for that in the future.

Fraser Jack
Yeah, it’s really interesting, the stats around advice based or advisor based complaints versus product based complaints. And I guess that probably comes back down again to that communication, understanding where advisors are probably doing a good job of letting their clients know, in advance, you know what to expect?

Natalie Cameron
Yeah. Well, I mean, that’s part of the obligation. That’s part of the responsibility in the job. You know, It’s really important for advisors to outline the risks and the, you know, the, the compromises, as well as the benefits of the products that’s being recommended.

Fraser Jack
expectation management seems to be, again, a huge piece of this jigsaw puzzle. And when I think of some behavioral economics around how we as consumers, trade insurance policies, and then if I want to throw the health insurance, under the bus here, it kind of feels like go as you sit here looking at each other, we’re both wearing glasses, we’ve probably claimed glasses on our health cover, or whatever it might be. It kind of feels like, we live this process where As consumers, we think we’re there, we’ve got this insurance, we we need to climb on it at some point.

Natalie Cameron
It’s an interesting one, isn’t it? I mean, I guess I see the benefit of having health insurance as a different benefit to having life insurance and really with life insurance. It’s the you know, it’s sort of the being able to sleep at night, why it’s really with both but you know, it’s, it’s kind of those those things that could keep you awake in the middle of the night. That, that you didn’t think, well, you know, I’m responsible for these kids and responsible for this mortgage, and you know, you know, the the school fees, or whatever it is, but I have something in my back pocket, that’s going to make me feel good about getting about my, my daily life, I’m not going to think about it too much. When I think about it, I’ll get some comfort from it. There is benefit in that to me, as well as benefit in making a claim when I need it.

Fraser Jack
Yeah, I think yeah, I love the concept around the the the expectation management around saying that the best case scenario here is that this all of these premiums were a waste of money, and you didn’t need the cover and said that the best case scenario is you’re healthy,

Natalie Cameron
I’ll take not claiming as my best possible outcome. Yeah.

Fraser Jack
So we’ve sort of covered up a little bit on group being that blanket or or that, that, that, that, you know, getting in place helping a lot of people get cover, how do you see group in the future? Are they you know, is group going to go under Recent changes, like individual heads? Or?

Natalie Cameron
Oh, look, it’s you know, I’m sure that there will be changes, you know, I what I hope doesn’t change is, you know, the, the extraordinary superannuation and group insurance environment that we have, you know, just something to be proud of been, you know, in lots of different countries and looked at the, you know, the financial systems in in various places. It’s one of the benefits of working for, for multinationals. And look, I’m always so proud of of our superannuation system and the white roof insurance works, I think it does afford cover to an enormous number of people who might not otherwise be able to afford it. You know, in the past, that has proven to be of great benefit to many of those people. And so I’m sure that there’ll be changes, you know, nothing ever standstill. But I hope we retain that. That wonderful system alongside the equally and very different, tailored personal advice. industry as well.

Fraser Jack
Yep, there’s been some there, we’ve talked about income protection being the the Disability Income piece of this jigsaw puzzle. There’s some comments around or some ideas around that, you know, trauma or crisis recovery, could also be on a learning curve to say, take the take what we’ve learned out of disability income and apply it to crisis,

Natalie Cameron
I feel like in the evolution of products, they will there will almost inevitably be some learnings as we take this big step change on IP. I think, you know, from my understanding anyway, on my experience, and it’s certainly not, you know, it’s certainly not everyone’s experience, but I do think it has been the IP cover that has been the, you know, the significant issue. But you know, I’m sure that there’ll be learnings for trauma, TBD, and others.

Fraser Jack
Yep. Now we’re in a, we’re at a place where we’re, as we mentioned, we’ve, we’ve been through a lot of the changes, there’s still some more to come. How do you think they the products will start to settle? Will you see them coming together a bit closer? Or what are your thoughts on how they will that might work?

Natalie Cameron
Ah, look, you know, I probably, I probably asked that question of our, you know, of our advice industry, you know, I think I think there’s these products, anything new is is going to seem alien, perhaps complicated. Certainly different at the start. I can’t help but think that you know, that they will be integrated into, you know, different philosophies of how to make advice recommendations. There’ll be integrated into different product suites and recommendations that certain advisors give to their particular type of client and I think there’ll become the new normal and I You know, I’m sure that the advice community is going to adapt and change. Because I’ve seen them adapt and change to so many other challenges over the years that I’ve been involved in this industry. Yep, certainly

Fraser Jack
resilient. Talk to me about the concept of rehabilitation, you’ve seen a lot of this over the over the years, you’ve worked in claims with claims and claimants, the idea of, you know, helping people get back on their feet and rehabilitate has been such a big part of that claims process, do you think that’s going to sort of suffer a little bit in the future?

Natalie Cameron
You know, it’s, it’s a, it’s a fascinating question, because, you know, shorter benefit periods or, you know, or smaller benefit amounts, could, you know, the assumption could be that there should be less invested in, in rehabilitation, but I think, you know, the rehabilitation, that is that is being done now, you know, has been a wonderful thing. For, for, for life insurance customers, as well as insurance, and really a win win for everyone. And I think it’s really a drop in the ocean so far of what could be done to, to help to help those, those clients on climb, I just think there’s so much more opportunity existing. Anyway, I don’t think you know, that these changes will mean that it becomes something unnecessary or, or not financially beneficial, you know, to invest in I mean, you know, for one thing alone, it is just a wonderful product offering of an insurer to offer not only to, you know, to, to write the check, but also to support someone to get back to health. And I, you know, I really hope that that continues to grow and flourish, you know, in the context of these new products as well.

Fraser Jack
Yeah, I couldn’t agree more couldn’t agree more. Now, final question. Just on the disruptors of the industry, you know, that the larger groups, the big tech companies, what any thoughts or ideas in the years to come If, if we start giving all our personal information away to say, a Facebook of the world, that they’ll start being able to tailor insurance, or those sorts of things and come in and look to disrupt the industry,

Natalie Cameron
you know, I’m sure that disruption is, is coming in, in one form or another, how quickly it gets here and changes things is another, I do think that there will always be a place for the personal engagement, and face to face, discussion about financial situation objectives and needs, about hopes and dreams about fears, you know, about family about finances, that, that an advisor has with their client. And I think that relationship of trust, you know, will continue to be an important thing. And, you know, the, you know, the more advisors focus on that, and work on that and continue to do that, the better. I don’t think that’s going away, no matter what AI can deliver, in terms of, you know, you know, tailoring to, you know, after reading your bank statements, and, you know, your spending patterns and your you know, your your various other, you know, facts and stats.

Fraser Jack
Natalie, thank you so much for coming on the the series with us and chatting to us. I really appreciate your your time, effort and energy. Thank you.

Natalie Cameron
It’s been fantastic. Thank you so much, Fraser,

Fraser Jack
thank you for joining us again, Benjamin.

Benjamin Martin
Thank you, Fraser.

Fraser Jack
Now we talking big picture, the future things that haven’t happened yet, obviously can’t hold you to any of these things, because we don’t really know what happens in the future. Tell us about obviously, we’re at this place now. We’ve got these new products. They’re just starting to settle in I guess we could say, what does the future hold?

Benjamin Martin
Oh, that’s, that’s That’s the million dollar question Fraser. I keep coming back to and I obviously do not have a crystal ball. But I keep coming back to. We’ve got these new contracts that had been built with the one fundamental objective in mind, and that is to remove the nasty ad hoc rate rises and pricing pressures of the past. So when we look at it IP contracts, now currently on offer, I’m hopeful. I’m hopeful that that the industry collectively comes together to go to the root cause of why we’re having this discussion in the first place that we don’t lead. And this doesn’t result in another arms race, in an effort to grapple for more market share because our advisors, they won’t be able to, it’s just not going to be palatable from an advice practice perspective. Ultimately, Consumers and Australians, they need this covered, they need these contracts to protect their income. And I noticed that even for a client that’s got no levels of non deductible debt on the family family balance sheet, typically, there’s always going to be a meaningful place for an IP policy. So we’re hopeful as an industry, or at least for me, that worked in the tech world that we’ve gone and addressed the root cause of why we’re having this problem in the first place. And we’ve got contracts that will remain fit for purpose, and be really liberated from those pricing pressures going forward.

Fraser Jack
Yeah. So. So learning from the lessons of the past, creating that stability and bringing that stability back to the normal part of, of a insurance portfolio.

Benjamin Martin
Absolutely. Right. And I guess some of the downstream flow on effects there is that, you know, when you think about the end consumer, if they do suffer from a temporary owners, you know, the neath contracts are designed to where practicable, transition the client back to wellness and back into the, into the workforce where we know, that’s going to be in their best interests long term.

Fraser Jack
Yep. Now, this is all well, we’ve pretty much been talking about individual the whole time, we haven’t sort of touched on the group aspect. Obviously, individuals, what has been changed first group is still get to be touched. What are your thoughts on, you know, the future of how group and individual will work together?

Benjamin Martin
Yeah, look, it’s it’s an important one. In terms of what’s going to happen in the group space, I don’t know. But the discussions that I’ve been having with advisors is around, okay, if my client if I’m looking at recommending a new world IP contract for my clients, that is seemingly much more plain vanilla compared with the old settings, then why would I not just nudge my client towards a group salary continuance split? Wes hearing that a lot? It’s a valid question. What we say as techos is that when we compare a group contract a group IP contract with a retail IP contract, the similar principles remain as they did in the old world. Okay, so the things you need to be keeping a lookout for, particularly from a best interest duty perspective, is is that group salary continuous contract guaranteed renewable? Is there a risk that the T’s and C’s within that group plan can be downgraded? Once the contract goes into force without the client even subscribing to it? That tends to happen, we see T’s and C’s within grip contracts being downgraded, especially when a group super fund puts out a tender and reorganizes their underlying insurance arrangements and providers. Again, there’s a risk there that if the client has a group contract that we’re setting the wrong expectations from the outset, noting that they’re going to be they’re having to pay the premiums along the way, right, typically from their super fund. So guaranteed renewability is one thing to keep a lookout for. The other thing to keep a lookout for, when you’re comparing group and retail is the is the definition of pre disablement income. So within the retail space, generally, you get a 24 to 36 month look back period. For the purposes of striking the monthly insured benefit for the client within the group space, that look back period is much more narrow and confined and restricted. So that’s not going to be of any value for those clients that have variable levels of income from year to year. The third thing to keep a lookout for with these group contracts, usually you don’t have the ability to link an ordinary extras plan to the super owner group salary continuance contract. So that’s code for massive alarm bells when it comes to needing a super low condition of release at time of client. If the client doesn’t meet the super low condition of release, there’s no second line of defense that they can fall back into within those group contracts. So there’s a big question mark, as to whether whether or not the clients going to be over received the monthly insured benefits when they need it most. Now, I’m not totally slagging off group contracts. That’s not That’s not my intention. But for the completeness, and for the sake of having a balanced discussion in this space, I think it’s important to call out those traditional shortcomings of a group contract that may not necessarily be in the clients best interests as a whole.

Fraser Jack
Yeah. Now, you’re absolutely right in it. And as as a techie, in this space, of course, you see that very clearly. It’s probably a little bit difficult. It’s very difficult. It probably easier for advisors to but it’s very difficult, difficult for consumers to see that or to understand that part of you know, the value that comes with guaranteed renewable the you know, the loss of control and ownership that happens in a group product that an understanding of that loss group plays an amazing part of getting a whole lot of people cover that wouldn’t otherwise have it. How do we get that message? out in the future to consumers that, you know, it just because it says income protection on the label doesn’t mean you can compare, compare with retail. Yeah,

Benjamin Martin
and this is where the value of the advice really emerges. And this is a crucial role that the advisor, this is a meaningful value that they bring to the table. They take that deep dive, they understand the client and make a recommendation accordingly. Without that detailed analysis, you know, there’s a risk that the client is going to end up with the wrong contract that’s not going to meet their expectations when they need it most. And this goes to the heart of the issues that we’re seeing in the industry at the moment, the cost of advice, as you know, Fraser is escalating. And it’s getting to a point where, you know, as practice principles tell us it becomes it’s not commercially viable to service and provide advice to that mid market of Australians that need advice the most. So it’s Fingers crossed. And we’re hopeful that, you know, these reforms, these APRA, di reforms, together with their broader review into the cost of advice, all together is, is going to produce meaningful client outcomes for our industry. And ultimately, for Australian consumers in the end,

Fraser Jack
then one of the things that I’ve sort of been discussing with some of the the other people on the on the panel is the idea around, you know, behavioral economics, the way that we think about insurance as a product that we should be claiming on at some point, same way, as we probably all if you’ve had health insurance, you might have gone and got your eyeglasses or some stuff done, just to get some of the money back. How does that behavioral economics from a point of view, how do you think that sits with income protection insurance and risk insurance and how we sort of have to have a different outlook on that moving forward?

Benjamin Martin
Yeah, that’s a tough question. I’m not sure if I’m going to add much value here. But the analogy I draw in my mind is car you know compensated be comprehensive car insurance, when when of the benefit is going to materialize for me, as a policyholder, it’s when something goes wrong. That’s the parallel I’m drawing in my mind Fraser with an IP contract. Yes, I’m paying the premiums along the way. But the benefits will tend to materialize when something goes wrong, to soften the blow, so to speak, if I can use the right words there, from a behavioral economics perspective, looking at this standing in the shoes of the consumer, the one thing that may soften the blow is the fact that if it’s a self owned income protection policy, I’m entitled to a tax deduction for my premiums, so whatever quote, whatever premiums being quoted, whatever that headline premium is, that’s not reflective, as our advisors now have the hip pocket cost of holding that policy, unlike a comprehensive car insurance policy, where it’s obviously a non deductible expense to the family budget. That’s how we kind of frame it.

Fraser Jack
Goodbye, goodbye from yet now let’s let’s push ourselves out into the future. 10 years from now, looking back, how do you think all these changes have settled in?

Benjamin Martin
Well, I’m hopeful, I’m hopeful that we’ve got IP contracts, we’ve got a good proportion of Australians that hold robust income protection contracts that are liberated from those pricing pressures of the past, because let’s face it, the more susceptible these contracts are to pricing pressures, the greater the risk that they will lapse, and they won’t be enforced at the time when Australians need them the most. So I’m an optimist, but I’m in my mind’s eye in 10 years time, I’m hopeful that the industry has settled, the dust has settled, all of the steam has come off both the regulators and us as professionals in Australian consumers and that ultimately, we’ve got stability in the pricing structures not only for IP contracts, but life insurance crisis and TPD policies as a whole.

Fraser Jack
If you’re interested in continuing this conversation with Ben or any one of the team at AIA Technical Education Center of Excellence, you can hit them up via the email at tc@aia.com, check out the Business Growth Hub for AIA Technical Services, or just contact your local AIA BDM. Thank you so much. Really appreciate it. We look forward to catching you very shortly.
Brilliant. Thank you so much. Really appreciate it. We look forward to catching you very shortly.

Benjamin Martin
Thanks for having me, Fraser.

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