Risk advisers speak out on industry

Sitting around a table with a number of risk advisers and throwing open the question of what the major issues surrounding the risk industry are will never lead to a short answer.

In actual fact those advisers who have spent much of their careers involved in the recommendation of risk products to clients find themselves frustrated at the static nature of products, the inability of product providers to support them and differences in what the two groups are trying to achieve.

Money Managementdrew together a number of advisers to discuss the criteria for its inaugural risk awards and also used the opportunity to discuss some of the big issues surrounding risk insurance.

And one of the areas in which advisers still face deep frustration and resentment is the poor level of support they receive from risk houses, with business development managers (BDMs) coming in for the most heat.

Geoff Robinson, from Geoff Robinson Insurance Agencies, says he does not see a real distinction between BDMs and many are ‘pretty ordinary’ in their understanding of products and adviser needs.

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“They tend not to understand the product, the people working with them or what makes an adviser tick,” Robinson says.

He is not alone, withAssociated Planners’ Ian Satill maintaining that many live up to the old adage of being highly-paid messengers.

“There are of course exceptions to the rule, but generally they could be better with some companies giving the appearance they support their incompetence,” Satill says.

“Put it this way, a state manager from a large risk house asked me to recommend me a good pro-active BDM and I said I couldn’t name a good reactive BDM.”

Dexx&rmanaging director Mark Kachor, who also sat on the panel in his role as a risk industry researcher, says that despite many advisers dealing with a range of risk companies they find it hard to name good BDMs off the top of their heads.

In fact, Kachor says he finds those advisers that actually receive the service they are seeking tend to be pro-active in their own right and demand services from risk houses.

“What this means is despite all the efforts and millions of dollars spent on servicing advisers, at the end of the day advisers still build and maintain relationships with key people at their own expense and time,” Kachor says.

Centrestone Wealth Management Jon Pillemer says he finds the onus is often on the adviser to act in seeking service from product providers.

“I spend time building the relationship and call key people and catch up with them because I feel they are the most important client,” Pillemer says.

“There has also been an increase in service levels across the board, but at the same time there is no reward for those advisers who put in the hard work, with service often the same for those at the top and bottom of the scale.”

Pillemer does admit that the tide is turning and some risk houses are becoming concerned that advisers have to take this approach and are adding dedicated people, but maintains advisers are still seeking direct contacts with key service people.

However, Satill says these gaps in service are reflected across the industry with an absence of uniform and competitive products across the industry, despite the best efforts of a number of risk houses.

Associated Planners’ Samantha Ellicott says competition has been good in some areas, but it too has not been industry wide and while there has been beneficial change in the definitions and features of products for clients, premiums are still the source of problems.

Ellicott says this is the result of these features being added while prices were kept low and now there are a high number of policies in force with these enhanced definitions and features that need to be funded in the future, resulting in increased premiums to cover claims.

This has in turn had a flow-on effect into the industry and to an extent made an impact on the range of products advisers wish or are able to sell.

Yet PSK Advisers’ Des Roll says advisers are now being forced to do greater comparisons of products as interpretations of definitions and prices have grown wider.

“This has certainly lead to greater shopping around and we have found better product and cheaper prices indicating the industry has looked at itself, but from a claims point of view, are all these bells and whistle benefits actually the things being claimed on?” Roll says.

In fact, Roll says in many cases his clients are not concerned with the benefits but more concerned with price of the policy.

“That’s of course when our job comes into play and we can indicate difference in price as well as products, but if there is not a huge difference it is hard to say to clients to stay with a risk provider especially if the clients can’t afford it,” Roll says.

But when quizzed over what has been the driver behind prices the answers are not simple with Robinson claiming the quality of the underwriting process leaves much to be desired.

“I have no problems with those underwriters that make a decision, but do object to them coming back for more information three or four times after supplying the initial requested data. It has become just a grind,” Robinson says.

Kachor says much of the pressure on premiums may be related to the claims experience of each company.

“I question whether we have a case where 100 per cent of claims are genuine and the industry pays 80 or whether it receives 120 per cent and pays 110 per cent. Who pays the most fraud claims? I suspect the industry pays 110 per cent, but that is down from 150 per cent,” Kachor says.

Laing Advisory Services’ Sue Laing also says there are problems with the claims experience and states often it is a battle to get information regarding claims.

“It does not really come down to the percentage of claims paid but the reasons for denial, which would be helpful for all the industry to know to improve products, underwriting and so on,” Laing says.

But Kachor says this information, while it could be made freely available, is cut up in the back office systems of risk houses and is hard to extract.

“The reason most risk houses don’t disclose their claims information is that most don’t know. Dexx&r does research on this and it takes a lot of time and having to deal with ancient systems and drawing it together. They keep track of claims, but no one is recording the particulars of a claimant’s employment or their type of policy,” Kachor says.

In highlighting areas the industry could make some rapid moves, Roll says a forward move has been the separation of investments and insurance and a return to basics, but this has not been reinforced with the appropriate education in the financial planning space.

Satill says this is because the risk industry does not have the hunger for business that the funds management industry does, while Ellicott says the focus on planning in recent years has diminished the place of risk.

“The big focus on planning means risk has lost out and while many companies hold it they do not promote it. The groups may have a distinct risk department but regard risk as a poor cousin of managed funds,” Ellicott says.

“The reason for this approach is that risk is still losing money on in-force business and possibly on new business and the companies know they have to change, but are they willing to do that?”