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Benn Bathgate

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FSC committee to probe ‘viability’ of adviser distribution

Friday 7th of December 2012

FSC chief executive Peter Neilson said the FSC’s newly-formed Life Insurance and Advice Policy Committee would “address the viability of the adviser distribution chain for financial services.”

Neilson said the idea to examine the role of adviser distribution arose from FSC research on underinsurance.

“It looks as though we’ve got a potential market with much greater need that we’re currently providing for,” he said.

“In the past we’ve disproportionally relied on the broker distribution channel, and the question that arises is with things like income protection, why are we selling to less than 20% [of the population] rather than 50%?”

Neilson said at present, the adviser model worked well for selling to the top 10-15% of the community, but was failing to penetrate further.

“We’ve got to use all of the channels better than we have done previously, and [examine] how we can build on the broker channels,” he said.

“We have a very good business segment, touching quite closely to 20% of the population through the broker chain. How can we extend that on a cost effective basis and have more products being sold by brokers to more people.

“If we’re serious about going from a niche market to a much bigger market, what are we going to do?”

Another issue Neilson said the FSC committee would examine is how to encourage people with more diverse backgrounds into the advice space, and how to utilise the relationships advisers have with clients’ to discuss a wider range of needs.

He said the committee aimed to put together a discussion document which would be put to the adviser organisations “to have a wider conversation with the sector, agents, brokers and their organisations.”

The FSC Life Insurance and Advice Policy Committee members include Naomi Ballantyne (Partners Life), Milton Jennings (Fidelity Life), Damian Lawrence (Sovereign), David Carter and Nadine Tereora (Asteron Life), Therese Singleton and Anthony Merritt (AMP).

Comments (3)

Mike Naylor

It is difficult to directly compare NZ's level of IP cover with other countries as most have IP cover tied into employment agreements or super. In general, however, we are on the low side and should be closer to 40 or 50%. Certainly it is a middle class rather than a lower class product. To 'IP Adviser' - as you are aware the worst case is not death, it is being so severely disabled as to never working again. A clear way to cut premiums to an acceptable level is to push out the waiting time to at least 3 to 6 months and add TPD. One of the reasons for the high costs below age 50 is often inappropriate structuring of the insurance plan. Above age 50 IP is expensive, but clients still insure their car, and long-term disablity is more likely and more severe than a car crash. As you say - it is really about 'perceived risk' rather than actual risk. So the question for the industry is how to make the public aware of the real risks. I applaud the FSC for starting to raise this issue, as there does not seem to currently be any good ideas on how to change NZ attitudes. One obvious issue, especially in Auckland, is how to get into the ethnic groups. The reluctance of many adviser groups to employ new adviser's whose first language is not English is a real hindrance.

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12 years ago

Regan Thomas

OMG I am going to completely agree with Mike Naylor! Except for the equal opportunities bit. There are a number of ethnic groups represented in my patch, and even more in the land of Auck. From a pure risk point of view trauma and IP are the key products, and have the worst uptake. While I feel some anxiety about the FSC's true motives (exploring direct/alternative distribution as an ALTERNATIVE) to advisers, I agree that there is too little info on the subject of penetration - rather than trying to increase the size of our slice, the pie just needs to get bigger.

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12 years ago

Regan Thomas

IP Adviser you make a lot of good points, but have you done your school homework? This is the Commission for Financial Literacy's page for schools. It is well used. http://www.cflri.org.nz/financial-literacy/schools This is from the November edition of Tukutuku Korero. It's all about new initiatives in FL for schools. http://www.edgazette.govt.nz/Articles/Article.aspx?ArticleId=8708 And this is an example of a real school doing real good work with real stuff. http://www.stuff.co.nz/business/money/6979797/Kids-learning-the-tough-lessons Let's not forget the young enterprise programme, and economics classes, if called another name, which are still compulsory at year 9 (3rd form) level, and many schools carry on at year 10. I do get really sick and tired of people listing things that schools should do, as if adding yet another burden to schools will solve their particular problem. NZ schools do very very well thankyou very much. NZ kids are constantly in the top ranks of the OECD testing results, with more ethnic diversity, more socio-economic challenges and less taxpayer funding per child than the countries we are compared to. Perhaps our schools could do more, but what would you like them to do less of?

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