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Last Article Uploaded: Tuesday, November 30th, 7:17PM

Insurance

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Nimble versus Big

How tough is it competing with banks for the sale of insurance? The has been a lot of growth in the bancassurance segment over the last ten years, but lately it looks like advisers have had the best of it.

Thursday, May 11th 2017, 10:25AM

by Russell Hutchinson

Banks sell a lot of insurance, but so do advisers. In fact, just recently, banks have experienced a fall in the sales they make, while advisers are going strong. Recent worries about regulation have also fuelled fears among advisers that the ‘big end of town’ is being ‘structurally advantaged’ – see comments on regulation by Murray Weatherston and Norman Stacey – for investment advice businesses. Are similar pressures evident in the insurance sector?

While the housing boom saw more people move and re-fix their mortgage, it drove lots of people into bank branches for home loans. Alongside those a lot of insurance could be sold. Many advisers feel that the people doing the selling were subject to less supervision because they were in a QFE and not giving advice - a structural advantage. Along with the advantages that come with scale and leverage of big-brand reputation, bancassurance businesses have achieved scale.

But recently, as it has become harder for first-home buyers to enter the market, and the number of owner-occupiers in the market has gradually fallen, bank insurance business appears to have ended its long-run of growth and dipped slightly. In such conditions, financial advisers’ more personalised business model seems to have coped with the change better. Sales of cover for rent and household expenses have been made for years by advisers to people locked out of the home loan market. Advisers have never been as dependent as bank channels on a single life event (applying for a home loan) and so have had many ways to obtain business.

European Insurer ReMark categorises advice seekers. About half are ‘professional advice buyers’, who look hard at qualifications, independence, and fees. A bit less than a third are ‘traditional advice buyers’, who prioritise the relationship with the adviser, who they chose on the strength of a personal referral, and the remainder were ‘guided direct buyers’ who wanted to buy direct, but needed advice. In New Zealand, I think the percentage splits would be different, but the categories provide some interesting guidance. One point is that a good professional adviser can be attractive to each category of buyer, provided they have a good process for assessing the client’s requirements and can flex their advice process to meet them – true personalised advice. That’s a level of flexibility difficult to match in a large organisation. A smaller business can also switch product manufacturers and compliance processes more easily than a large group can. In contrast, some banks are showing concern about advice risk in their wealth management businesses.

Those are the advantages for smaller insurance advice businesses. If that’s you, use them as much as possible.

Tags: Russell Hutchinson

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