The scale of the under-insurance problem in Australia is huge and anyone working as a financial adviser in the area of risk protection knows it. Michael Kinens discusses the role and value of technology in addressing Australia’s underinsurance problems.
This article first appeared in RiskInfo Magazine, December 2011.
The problem
Findings released by Swiss Re last month, and published in The Australian newspaper, reveal Australia has a ‘mortality protection gap’ (the amount of protection needed that is not covered by insurance or savings), of almost $1 trillion ($972 billion). The results are from a company survey of 1000 working people aged between 20 and 40 in Sydney and Melbourne.
Older statistics from Lifewise reveal that only around 4 per cent of Australians with dependent children are adequately insured. If we think of this problem another way, it means 96 per cent of people with kids do not have appropriate levels of life insurance cover. Imagine if they all came knocking on your door at once? While it might be a great problem to have, how would you service them all?
It was a problem brought to our attention by Guild Financial Services (Guild), an XPLAN client. Guild had a referral network connected with professional associations in the health care market; relationships with associations connected primarily with the pharmacy profession, but also with dentists, physiotherapists, chiropractors, vets and podiatrists; people whose risk protection needs were likely to be high. It was potentially a huge market for them, but it translated to many more potential clients than they could realistically service.
The solution
As technology continues to evolve, it can become an integral part of the solution. An online vehicle, capable of doing a lot of the front-end investigative work before an adviser becomes involved, is a logical place to start. This vehicle, which for obvious reasons should sit on the adviser’s website, needs to be able to provide a quote solution that helps people explore what they may or may not need in the way of risk protection, in their own time and place. People visiting the website could investigate their own risk protection needs to determine what they might need in terms of life insurance, income protection, trauma and TPD, and advisers could promote the facility via their marketing campaigns.
The facility should also allow people to assess the benefits from various companies, produce quotes and then allow them to initiate contact. This action would be the kick-start for a scaled advice process.
To drive up efficiencies for both consumers and advisers, the system should be capable of integrating all the data entered by the potential client down the line into the adviser’s financial planning program. The advice firm should not need to become involved in the process until this stage and even at this point, the information provided by the consumer should be able to be fed into a short form SoA and an automated para-planning process. An adviser should not have to get involved until the short SoA is available for presentation to the potential client. According to Guild’s Head of Financial
Planning & Advice, Mark Birrell, this allows an adviser to start interacting with the potential client at a stage where both parties have a very clear view of the insurance needs and the client is seriously thinking of moving forward to implementation.
| |
“ The underinsurance problem can be reduced using technology to support face-to-face advice activities together with a complementary direct life insurance offering to supplement those activities. ” |
|
Solving underinsurance
Technology can be used to pre-educate people about the need for life insurance; however putting the insurance in place is still an advice activity. While events, such as getting married, buying a house and/or having kids are usually the triggers, technology is another way to help the process take place.
While people are best served by sitting down with an adviser and working through their insurance needs, technology can also help solve the underinsurance problem by providing a mechanism to present a direct insurance offering to potential clients via partnerships with insurance providers. In the case of Guild, the group partnered with OnePath to provide a direct life insurance offer which is sent to potential clients three times a year. Whether these potential clients take up the offering or not, it does trigger them to at least think about their insurance cover requirements, and the financial advice business can still be involved in the process.
The benefits
The benefits of a technology tool that takes some of the pre-investigation and pre-education work out of the process are obvious. Such a tool will streamline both the leads process and the fact finding process.
It can also automate the advice process which begins as soon as the potential client enters data and acts on the analysis. This means internal staff members do not have to interact with prospective clients, many of whom may not proceed to implementation. And, because the data can be seamlessly integrated with financial planning programs like XPLAN, staff members do not have to perform labour-intensive data entry.
Bottom line: a technology solution like this means an advice business can run more efficiently and employ fewer back office staff, while reaching more people with a sound scaled advice and service process.
Costs and efficiencies
When Guild started to look at using technology to increase its capacity to service potential clients, it was a boutique business with ten financial planners and eight life insurance advisers across six practices. After implementing a technology solution, through natural attrition, it is now a boutique business with ten financial planners who are also life insurance advisers across four practices. The business has scaled with technology.
Birrell says that even with fewer advisers, Guild has become far more commercially efficient and profitable. The back office para-planning has been centralised and back office staff numbers reduced – a reflection of a process that is simpler, faster and not paper based. And in the 12 months or so since going live, the group has experienced an increase in the size of advised premiums and its ongoing revenue has increased.
Such is the power of technology