The end of life as we all know it?
The future of Australia’s life insurance industry may be in serious doubt, following a dark skies forecast from former AMP Financial Services managing director Ray Greenshields.
Greenshields, who left AMP in December last year but has remained a director of the Investment and Financial Services Association (IFSA), says life insurance today is but a "shadow of its former self" and there are large question marks over its future.
"There are lots of questions being asked," he says. "But it really just comes back to the evergreen issue of the management and the competition. The industry has a right to play but it has very few special advantages these days, and will have to compete more on its merits than ever before."
Greenshields will deliver a Weather report on the life insurance industry at this month's IFSA conference in Melbourne. He claims there are many questions that have created stormy weather for the industry, but not enough answers.
He says the life industry is feeling the pressure of competition from fund managers who have introduced direct distribution and given clients the choice of funds.
Life insurance groups have also felt the impact of a shift in insurance schemes from defined benefit to defined contribution, with many funds declining in client popularity.
These changes have meant many life insurance companies have altered the structure of their business, with many dropping the life insurance label altogether.
"There are very few companies that would define their business as life insurance. Most define their business much more broadly than that, calling themselves integrators or broad-based financial service provides," he says.
Greenshields says the more successful life insurers are those who reinvented themselves as fund mangers.
"It has been a long slippery slope. The industry has fought hard to preserve its advantages but I think the time has finally arrived and it now has no special advantage," he says.
"I think the industry on the other hand does have the advantage of being consumer friendly over the past 20 or 30 years which is a plus but perhaps it has been helped there by regulation not of its own volition."
Greenshields says only time will tell if the life industry will disappear entirely, however he says it will be a tough battle as fund mangers and life insurers are now on level playing fields.
"Let's see how effectively we [life insurers] compete for the funds now".
Ray Greenshield on challenges facing the life insurance industry:
competitive position of fund mangers
shift from defined benefit to defined contribution schemes
fund managers opening up direct distribution.
choice of fund.
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