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NewsHow consumers like you are changing the Life Insurance industry

How consumers like you are changing the Life Insurance industry

A couple of years back I decided to review my insurance situation. I had been retrenched and needed to cut back so every dollar going out had to justify itself. When I added up all my insurance costs it came to $800 a month including cars x 2, health, house and contents, income protection, life, funeral and trauma insurance.

When I mentioned this to a friend, she questioned whether I really needed all that insurance and whether I was in fact “over-insured”.

Some of these are absolutely essential in my view like home and car (I live in a bushfire-prone area) but the others were up for discussion. Like many people I questioned whether I needed private health cover given that we live in a first world country with one of Sydney’s top hospitals just down the road.

When I did the math of funeral insurance I realized the policy would cost me more over the long term than it would pay out so I cancelled it.

Which brings me to life, trauma and income protection. I’m a single parent with 3 kids and an elderly parent living with me as well as a hefty mortgage. If something unfortunate were to happen to me, my family would struggle to maintain the payments. So I decided to review my life policy with my broker.

But more and more of us it seems are now buying Life cover in other ways thanks to the internet.

The FiftyUp Club’s Life Insurance provider NobleOak has recently released a new Whitepaper* on the trend for consumers to research and purchase financial services products online.

A comprehensive research study was conducted in December 2016 by an independent research firm Pureprofile, that asked over 1,000 Australian about their buying behaviour with respect to financial products, the results are very interesting.

The old adage that life insurance is “sold”, not bought, appears to have permanently changed and the trend for consumers to research and purchase financial services products online is spreading quickly to Life insurance.

According to over 1,000 Australian adults aged between 30 and 60 years old:

  1. While many Australians still rely on financial advisers to “sell” them a Life insurance policy and ensure their family is adequately protected, more and more Australians recognise their own need for Life insurance and Income Protection cover and are sourcing online research and comparison tools to help them.

This is consistent with a wider trend, with 61% of people now seeking to obtain advice about their overall financial needs using the Internet.

2. The Internet has become a predominant source of Life insurance advice by Australians, with advisers still playing a role for many. Of those who seek to obtain Life insurance advice, 32.2% prefer using the Internet, while 25.4% use a financial adviser and 20.4% rely on family members.

3. Online comparison tools have become a key driver of needs Many Australians rely on online comparison tools to research Life insurance products. 66.4% of respondents use websites as a way of comparing Life Insurance and Income Protection policies, compared with an adviser at 22.7%. 34% of people seeking Life insurance advice use online comparison tools.

4. Buying behaviour across financial services products varies considerably The impact technology has had on how we use financial services products has varied significantly between products. 79% of respondents believe technology has changed their interaction with banks over the past 3 years, while Life Insurance and Income Protection remain laggards at 37.3% and 33.6% respectively.

It is inevitable the use of technology for purchasing Life insurance will increase just like other financial services products.

5. There is a stark difference between purchasing behaviour and future intention While a vast majority of Australians search for Life insurance or Income Protection insurance products online, very few purchase directly online - at this stage. Their intention to do so in the future however shows an imminent change in consumer behaviour. While only 6.5% of respondents have purchased Life insurance products online, 38.6% would purchase Life insurance online or through a mobile device if they needed it.

6. Advice is undervalued with evolving digital resources While many Australians still rely on financial advisers, they appear unwilling to spend a lot on this advice. More than 56% of respondents stated they were unwilling to pay anything for Life insurance advice. This remains a fundamental problem for the industry. 72% of respondents would be confident in purchasing a Life insurance or Income Protection product online, without financial advice, if the right resources were available. Based on these results, a major behavioural shift is taking place and further acceleration appears very likely.

NobleOak’s CEO, Anthony R Brown said: "Buying behaviour is quickly evolving. While a majority of customers previously outsourced their financial affairs, we are moving to a new state where people are taking more control and insourcing these decisions. The growth in SMSFs (self-managed superfunds) illustrates this trend.

I’d be interested to hear your thoughts on purchasing insurance policies whether they be home, car, health or life insurance. Do you prefer to speak to someone in person or are you happy to compare on line? Leave your comments below:

 

*WhitePaper 

FiftyUp Club Pty Ltd ACN 166 905 175 (FiftyUp Club) is a Corporate Authorised Representative (AR Number 465649) of One Big Switch Pty Ltd ACN 150 963 474 (AFSL number 455982). Any advice provided is general advice only and does not take into consideration your objectives, financial situation or needs.

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How consumers like you are changing the Life Insurance industry

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Robert
Robert from NSW commented:

Further to the Funeral Insurance discussion, when we had a mortgage and kids, we set up life insurance. What is the difference between Life and Funeral insurance ? From a practical point of view, they both pay out when you die, they both include accidental death benefits, but with life insurance you are guaranteed to get back whatever you pay out and you get a bonus each year, often more than your premiums, and you can, if you have to, borrow against your current benefit. I see NO Benefit to having funeral insurance and the only benefit of a funeral bond is that it it doesn't count as a Centrelink asset, but then, so far as I know, neither does life insurance. I guess its time for Kayley to do some investigation. 

Eileen
Eileen from NSW commented:

I think funeral insurance is a ripoff, health insurance is becoming out of reach. I am now reviewing my options. I always tend to look online for any type of insurance and check reviews but would prefer to buy in person armed with knowledge gained Regards Eileen 

Gertraud
Gertraud from ACT commented:

I have insurances for my home & contents and my car. I do NOT have funeral insurance, my children will just have to use some of their inheritance for that. 

Robert
Robert from NSW commented:

Funeral insurance is a ripoff. The FiftyUp group should look for, and make available, a proper funeral bond arrangement (which happens to be Centrelink exempt) where folk can invest, and top up, as necessary to cover their costs as they need to. I note that the latest info suggests $12,250 is the Centrelink Funeral Bond Allowable Limit as of 1st July 2015, which is more than enough to cover a basic funeral or cremation. A much better option than insurance per se. 

Don
Don from QLD commented:

Wow i could write a book on this topic, I am in my 45th year of this industry. More people appear to be going direct, how do I know, because I spend more time assisting them when a claim comes along. Most direct insurers underwrite at claim time, Advisers underwrite at application time, they also have the experience of working in the industry so they know the write questions to ask as they have had to deal with claims and know the pitfalls. There is plenty of room in the industry for everyone, Advisers or Direct pick the one that you are comfortable with. The bigger question is getting the industry on a level playing field. Happy New Year 

margaret
margaret from NSW commented:

Can not afford a health insurance, do not own a car and the likelihood of losing the entire contents of my flat is so remote and the cost of replacement well covered by my bank balance I do not have contents coverage. I did have funeral insurance for a couple of years however as soon as my bank balance was a reasonable sum I cancelled it. I agree that for most people who have good money practises, this type of insurance is really not worth while as the payments and compound interest on the money is better in their bank account. The interest is a factor many to not take into account when calculating the full cost of insurance. 

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