When the adviser is the insurance

Des Morgan is well aware he’ll “take some flak” from the advice sector, but he insists his no-advice online life insurance model is filling a need – particularly for younger, internet savvy consumers.

Wednesday, September 28th 2011, 9:16PM 13 Comments

by Benn Bathgate

Morgan launched the Insurance4Me website back in April and is now offering customers who switch their policy Pinnacle Life cover at a 20% reduction on their current premiums.

"This is for a specific market, people who don't want advice and aren't going to go to a broker anyway, so I'm working on the basis that some insurance is better than none," he said.

"Some people don't want to see an adviser."

Morgan also said his approach to his target market meant he was not "trying to put them [advisers] down in any way, shape or form."

"If I want to attack I could pull out the commission thing and all that," he said.

TNP managing director Jeff Page said that while he preferred to see clients seek quality advisers, he was well aware of the growth in online insurance, a trend he predicted would continue.

"I think the number of people personally that want to go online and purchase will increase as time goes by, absolutely, but I still think there is always going to be a place for a good quality adviser that has a value proposition, and the value proposition is being able to give somebody completely unbiased advice."

Where Page and Morgan are in complete agreement is over the growing importance of the internet.

"You've got 80% of the population searching before they make a major decision, they go online to research or to compare, and if you are an adviser in the market place and you don't have a web presence, you're going to be at a disadvantage," he said.

Partners Life managing director Naomi Ballantyne also supported increased use of the internet for tasks such as filling in application forms and providing medical notes, but again backed the role of the adviser.

"You run the risk of the blind leading the blind, the client doesn't know what they don't know."

She was also wary of attempts to capture customers simply by offering low initial prices.

"Brokers have to produce illustrations that have 10-year projections, so you can get a feel for if the company are doing funny things with their pricing to make the first year look really good and then you know what, next year you're going to pay 20% more then everyone else in order to make up for it."

Another benefit to securing life cover through an adviser was highlighted by Fidelity Life chief executive Milton Jennings.

"They'll help fight for you when there's a claim, if you don't appeal through an adviser you've got to fight it for yourself, and advisers have very good relationships with the life companies they deal with," he said.

"They know the people within that organisation and they're able to talk to them and they've got a bit of leverage with them as well, so you lose a lot, and how long's your 20% going to last?"

Benn Bathgate is a business reporter for ASSET and Good Returns, email story ideas to benn@goodreturns.co.nz

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Comments from our readers

On 29 September 2011 at 2:44 pm 6ftndr said:
everyone to their own, not enough is being sold by advisers or being bought by customers - so every little bit helps

advisers can't be seen to be getting precious over this - the fish pond is way too big to worry about this line of marketing
On 29 September 2011 at 2:52 pm Des Morgan said:
Response to Article "When the Adviser Is the Insurance" from Des Morgan

I would like to make the following points

1)A recent study in the United States showed that 1 in 4 adults prefer to purchase life insurance direct via the internet,mail or over the phone.
Not surprisingly, younger consumers showed the most interest in purchasing life insurance through the internet. Among those aged 25-44, a prime group for purchasing life insurance 31 percent said they would prefer to buy direct, with three in four citing the internet as their preferred means of direct buying.
There is no reason to believe that New Zealand is any different!

2)I have been in the life insurance industry for over 30 years in sales management and sales and I have yet to see a adviser influence whether a death claim will be paid or not.

Consumers now have the power of choice and increasingly that choice will be to put their money where they perceive real value. And if that means a new generation of customers who will go online and buy life insurance instead of it being sold to them, it will be good for the entire industry.

On 29 September 2011 at 5:25 pm Giles Thorman said:
I do not think that anyone can really be worried about Insurance being available via a website, it is a fact of life.
What I REALLY have a problem with is Mr. Morgan advocating taking over other peoples hard work and offering a discount via Pinnacle. So the Broker does all the work, calculates the sum assured and gets the proposal underwritten; the Insurer pays all the cost of underwriting that and then the Carpetbaggers in the guise of Messrs Morgan and Saul arrive and take it over by discounting!!!!! I have nothing but contempt for that behaviour, it adds NOTHING and STEALS other peoples hard work. Regardless, how long is the 20% discount guaranteed for? Contractually 12 months maximum.
Hopefully Insurance Companies will stop Internet Brokers from discounting first year premiums via on line applications as we all know why it is done; it happened to me the other day. I spent a lot of time over a couple of weeks collecting information, coming up with sums assured and recomendations, the client thanked me as they had "substantially" increased their levels of cover because of my input; but they found it cheaper on line because of the discount.
One final thing that got my back up was Mr. Morgan's slightly condescending response to point made by Milton Jennings in the article "I have been in the life insurance industry for over 30 years in sales management and sales and I have yet to see a (sic) adviser influence whether a death claim will be paid or not."
Well you are a poor adviser is all I can say; I can think of at least five occasions I have influenced the payment of a Life or Trauma payment (both available on line) and a far larger number of occasions when I have influenced the payment of Medical or Income Protection benefits and I know of many other Brokers who have done the same or more.
By all means offer Insurance online, but no first year discounting ( why do you need to discount??) and most certainly NO Pinnacle Life takeovers.
On 29 September 2011 at 5:30 pm munch & punch said:
Well get on with it then Des, why are you spending so much time telling us all about it when really, who cares what you do. Also using Pinnicle Life??? well looking at their market share stats they have been a raging success since they commenced......not.
On 30 September 2011 at 10:26 am Majella said:
Des, you say you're not into "dissing" advisers and could pull out the "commission card", but you don't do that. However, you hook up with Pinnacle & Saul, who do EXACTLY those two things in their smarmy nasty little TV ads. So, you are engaging in it, by proxy. Two-faced at best.
On 30 September 2011 at 10:51 am Kevin said:
Try selling a basic commodity like milk a bit cheaper online Des, that might work better...
On 30 September 2011 at 3:19 pm Johnny Adviser said:
You sanctimonious twits. Have you considered the model of using web sales as a shop window for a full service adviser business? Are you telling intelligent educated young people they are wrong to use the web for life buying?

Are you trying to expand the market by selling to people born in the 1970's and '80's, or is it only your methods that are from then?
On 1 October 2011 at 8:07 am Kevin said:
who's the twit? No one is denying the web as a sales and promotional tool - it's the lack of advice one gets by buying a limited product online versus sitting down an adviser face to face...that's the issue i think...
On 3 October 2011 at 3:09 pm Andrew Slade said:
Next time your talking to Des Morgan, please ask him how he would feel about one of his clients that found they couldn't work work due to say depression, or may never work again because of becoming TPD'd who thought they "had insurance". The online approach creates a false sense of security.
On 3 October 2011 at 4:57 pm Craig said:
Can someone explain how a customer interprets the following 'Pinnacle can replace your existing policy with similar conditions for 20% less than you currently pay.' Similar is not exactly so what is different and how important are the variations? I guess the consumer won't know as no advice is offered! Also I assume the 20% discount is only in the first year of the policy as who can tell what the second year premium is going to be on any policy and each person is different. I do not believe this is clearly defined to the customer and from those I have spoken to their is an assumption the 20% discount flows into year 2, 3 and so on. The very reason they need advice....
On 4 October 2011 at 1:23 pm VictorVictoria said:
As an underwriter I can tell you that NOTHING replaces a good, thorough broker trying to do right by their client and continuing a relationship with them for years to come. I have the advantage of being in the insurance industry but there are so many people out there sucked in by so called "good deal" Insurances online, only to find out later that they are not covered for something they thought they were. An online policy can never replace the relationship an advisor has with his clients by explaining benefits and what they cover, Finding the best product/company to suit the client & Offers of terms. Advisors should always have a say when it comes to claims as well.
On 4 October 2011 at 2:13 pm Majella said:
Craig - no, the 20% discount does roll on year-on-year. the Pinnacle policy is matched to the normal excalation of the premiums the insured was paying, less 20%. Therefore, it really only gives a 2-year discount/holiday from increases, as by then the premium is back to where it was when Pinnacle took it over. However, the previously automatic 20% discount bit the dust some time ago, and now a short-form questionnaire is required. If there's any thing serious in that, then a 10% discount only, might be offered, or less. They can also simply turn the application down,too, of course. It's not as "sweet" a deal as they tend to paint it as. Also, if you care to compare on Pinnacle's own website, selling NEW business, the discount is around 3% (50 y/o/ non-smoker males $500K death only). Trauma is limited to Cancer only (selling to the biggest fear, rather than the genuine need?), maximum $250K. They used to offer TPD but I can't see it in the current offering, though I understand they do still take over existing TPD benefits on life contracts, to a max of $500K.
On 30 October 2011 at 11:13 pm Realistic_Rascall said:
We all agree - New Zealand has a huge uner-insurance problem. So surely it's better that individuals have 'any' insurance rather than none at all. An on-line product will never be better than a well thought out, tailor-made solution provided by an Adviser who truely has the customers best interests at heart. (rather than their own)
However, with the price of products increasing due to frequent churning, insurance is simply now not affordable for many people. So is it a surprise that many internet savvy customers will go for a more cost effective option?
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