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Pinnancle Life chief executive Michelle van Gaalen says it is one of the companies caught up in the FMA’s data trawl exercise around churn, but it’s not an issue for the company.
Pinnacle runs a direct, online distribution model and it does have issues with churn. While the bulk of its business is online direct to consumers it does have relationships with 17 firms of financial advisers.
Van Gaalen says Pinnacle Life has one of the best persistency rates in the market and doesn’t see a lot of churn. While she wouldn’t disclose the rate it is mentioned as a positive factor in AM Best’s rating report.
“The (bb+) rating affirmations reflect Pinnacle Life's low product risk profile, direct distribution capabilities and a lapse ratio consistently below the market average,” AM Best says.
While price plays a role in persistency, van Gaalen says other factors come into play too such as service and value.
“I don’t think it’s price on its own. Customers are aware of what their needs are.”
She says it’s fair to ask the question is churn driven by commission, but she doesn’t know the answer.
“It would be fair to say there’s a degree of churn in the market, but is it natural or industry driven?”
She agrees with what John Trowbridge said in his report that if conflict is reduced “then you can ensure churn is natural”.
One of the key things that needs to happen is to reduce conflicts; then any churn would be at what she calls a “natural rate”.
But she says there is a “whole frame work of change” that needs to take place in the life insurance area and this includes life companies and advisers making change.
She says if this reduced costs then “you’d hope this that this was passed onto consumers.”
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