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 News | August 21, 2008 |
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Sales skills, compliance added to underinsurance culprits
THE INSURANCE industry is partly blaming itself for the level of underinsurance for personal and life cover in Australia, but has also pointed the finger at compliance requirements.
Life insurers in Australia have posted strong growth in sales via third party channels such as super funds and banks, but both the super industry and insurance representatives say there is a long way to go.
A survey of 2000 members across nine industry super funds by the Australian Institute of Superannuation Trustees (AIST) found that 74 per cent were underinsured by $100,000 or more for total & permanent disability cover, and half were underinsured for death cover by $100,000.
Many blame huge hikes in property prices – and now interest rates – and essential items such as food and fuel for pushing these types of insurance into the expensive luxury bracket.
However, several commentators at an industry forum held last month said part of the reason for underinsurance, especially in life insurance, was too much focus on compliance, to the detriment of teaching good sales skills to overcome a bad public image.
When he started selling in 1969, said Paul Jones, now national sales manager – Life Risk at ING, teaching good sales skills was allotted a higher priority.
“We haven’t got [sales staff] well enough equipped to sell insurance,” he said, adding that too much of their time was now taken up with legislative reporting requirements. “The most stressful part of their job is dealing with compliance.
“We had some cowboys in the ’60s and ’70s and we have been trying to crack down on errant behaviour for about 15 years, [but compliance requirements] have made the industry undoable,” Jones said.
“There is an industry within an industry called research and an industry within an industry called compliance, and I question how much we need them.”
He also noted that he had rarely ever seen a life insurance advertisement on television.
Jim Minto, managing director of insurer Tower Australia, said Australians knew little about personal insurance or their level of life cover. “I don’t think the industry has spoken to its consumers or government very well,” he said.
He said that life insurers were distrusted around the world and noted that different communities had “different appetites for grief in the media”.
“Mis-selling” also hadn’t helped, he said. He pointed in particular to the UK where 25 per cent of claims for “critical illness” cover had been rejected due to a lack of a common definition for the cover in recent years.
In the UK, consumers have been dropping so called “personal protection cover” – life, critical illness or income protection – with life cover policies alone dropping by 13 per cent in the past year, according to figures from the Association of British Insurers.
Again, many there suspect it is largely related to inflation in essential items such as food, fuel and high house repayments.
However, the AIST survey also found that there was a “reasonable level” of overinsurance, especially among those under 32 with no dependents.
As well, in the UK, the Competition Commission said that personal protection insurance bundled with loans had led to consumers paying £1.4 billion ($2.9 bn) more than they should each year because they weren’t told they could use competing products.
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19 June 2008
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