Risk insurance looking good amid market carnage

Risk insurance is becoming more popular as financial planners look to ensure a steady stream of income to offset market volatility, according to Troy Edmondson, the senior partner at Business and Estate Planning Specialists.

Speaking at the Financial Planning Association national conference in Queensland, Edmondson said the carnage in the marketplace made selling risk insurance sexy, as it guaranteed a secure cash flow when the dropping market caused financial planning practices’ income to drop.

Edmondson urged financial planners to consider moving into the risk insurance space. The risk insurance industry is growing at approximately 10-15 per cent every year, he said, and with only 2,000 risk advisers in the marketplace, there would be no competition for clients.

Edmondson also said underinsurance in Australia provided an opportunity to take advantage of the risk insurance industry, with Australia having one of the highest levels of underinsurance in Western countries. Personal and mortgage debt is at an all-time high, and clients are unaware of the dangers of being underinsured, he said.

The ongoing problem of paying for expensive medicines also provided good opportunities for advisers to start advising their clients on risk. A client combating breast cancer could expect to pay upwards of $140,000 for drugs, and unless they are rich, such an amount of money would be beyond the reach of most individuals, Edmondson said.

Growing a risk insurance business is about building relationships with clients, creating empathy and providing a strategy of quick solutions to help clients, and not about products, according to Edmondson.

The most successful way to get clients were by working with accountants, who could push clients into the arms of risk advisers, and by adopting a ‘coffee table’ method of talking to clients about their insurance issues, as well as adopting effective marketing techniques.

Financial planners should talk to underwriters to learn enough of the industry to strike out on their own, Edmondson said, with underwriting courses also available that would bring financial planners up to scratch with the skills they need. They could also talk to claim managers about how to put in an effective claim and make sure policy wording is effective.

Edmondson said he believed insurance was sold and not bought, and while there may be some interest in buying risk insurance from low-income earners who were worried about the investment market, they are not the people financial planners traditionally targeted in attempts to broaden their revenue stream.