Our research indicates that for many years, risk advisers have been nearing endangered status, and recently, they are on the brink of extinction.
Alterations in commission frameworks, coupled with hikes in premiums and profitability issues, have led specialists within the risk-advice field to either exit the industry or explore alternative advisory routes.
While the profession in general has lost thousands of advisers in the past few years, risk advisers have been disproportionately represented in the statistics. In fact, between 2020 and 2022, risk advisers were between 2.4 and 2.5 times more likely to depart than their holistic adviser colleagues.
How the landscape looks now
Across Australia, there are now around 150 ‘pure risk’ advisers, data compiled for the 2023 ARdata Life Insurance Study shows. In other words, less than 1 per cent of the 15,800 retail advisers in the country fall into this category.
A further 3400 advisers write at least some risk volume, including 1200 who carry large risk books.
Most of the other advisers – 78 per cent of the profession – either refer to these risk specialists, write a small amount or risk or none at all.
Figure 1 – Adviser risk writing by volume
Source: Beddoes Australia Life Insurance Barometer and ARdata, 2023.
Figure 2 – Overall adviser numbers: 2016-23
Source: Adviser Ratings
Despite the low and falling proportion of risk advisers, Australian Prudential and Regulatory Authority data shows retail advisers write more than half of the country’s life insurance.
Given this, advisers have repeatedly expressed concerns the falling risk universe will result in a significant underinsurance problem in Australia.
The future of risk advice
As we’ve said in the past, the changing risk backdrop has implications for several different parties.
Survey results from our Life Insurance Study indicate the challenges persist for advisers, with the complexity of systems and underwriting standards continuing to create pain for those remaining in the risk space.
Advisers have told us clients have expressed frustrations, too. Some have become outpriced by premium rises and cancelled their policies. Others have become ‘orphaned’, as advisers step away from the space and stop actively overseeing their policies.
Given how quickly the landscape is changing, insurers could play a role in advocating for advice – and risk advice specifically – as a career path and finding new ways to support advisers who practise in the space.
The future of the risk space will also be influenced by Treasury’s next moves on the Quality of Advice Review recommendations. In her report, reviewer Michelle Levy proposed that the current exemption to the ban on conflicted remuneration for life/risk insurance products be retained, allowing level or capped commissions. However, she recommended that advisers receive written, informed consent from clients if receiving these commissions.
Treasury is expected to respond in the coming months.
Adviser Ratings has recently acquired Beddoes Institute to further enhance its data and analysis capabilities in the insurance space.
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Comments4
"Further to Scott's comments, I left the industry late 2021 because it simply wasn't worth the effort anymore. Plus, I could see where, after 35 years in our once-great profession it was only getting harder. With ridiculously onerous educational requirements needed to simply help people with risk insurance (I would have had to do a full FP uni degree!) and govt hell bent on working the system for their own re-election (not for client OR adviser best interest) I said "too hard", sold up and left. In retrospect a good move - just should have done it earlier ;-) I truly feel for the clients left behind in this mess and for newbies doing their best to start a career - much harder than 30 years ago, if not actually impossible in risk advice now. If there's any justice left in the world these politicians should be held to proper account for what they've destroyed simply to further their own agendas. It verges on criminal."
Squeaky'21 06:08 on 01 Jun 23
"I agree with Scott and Jeremy completely but don’t expect anything different in the future. The Labor Party, Industry Funds and Union Movement want to wipe financial planners off the planet. They will be thrilled with what they have done to risk writers and hope they can achieve the same result for financial planners. They are pushing hard for another type of financial planer, one that can give advice to anyone on buying their Industry Fund products. Those product seller will not need any qualifications and will not need to worry about paperwork. Will they get what they want? Of course they will!"
Rob 19:09 on 31 May 23
"ASIC, APRA and the government got what they want. Hopefully most advisers simply left the industry rather than taking more drastic steps. Personally I used to write a lot of risk and now I don't because it isn't worth the effort."
Scott 17:03 on 31 May 23
"The Government needs to look at what has happened and ask itself, have the Regulatory changes to the Life Insurance sector brought about positive results for Australians and Australia? With Insurance premiums doubling, most Advisers now not writing New Business due to the cost, time and insufficient return, due to the maze of complexity around risk advice, it has not been a good story. With thousands of Advisers leaving and only a handful of risk specialists entering the Industry, at what point will the Government finally sit up and take some notice, learn from it's mistakes and make it attractive enough for new people to want to join the Life Insurance sector as an Adviser. The current Education path is more like the road to perdition and for 90 percent of the subject matter, it has little to do with Insurance and the provision of Advice in this sector. Another question the Government needs to ask itself is; if we continue doing what we have been doing, will the situation get any better? The answer of course is a resounding NO. Therefore, knowing this, what do we need to do to turn things around? The answer has been front and centre for years, though the people in power have not been listening. In order to attract people to want to be a specialist Risk / Wealth Protection Adviser, then make it feasible to join. The current path via a University degree for Full Financial Planning that costs a fortune, takes years to complete and for most of the subject matter is irrelevant to risk advice, is not conducive to making people jump for joy. Instead, as per the past few years results, they are running for the hills. Separating risk advice from Investment advice and making it a true pathway that enables risk advisers to enter the Industry based on their specialist risk advice work, then allow them to continue with their studies later if they want to venture down the full Financial Planning route later, is a common sense and attractive route to take, that will help the Life Insurance sector to recover and allow people to get a foot hold and the opportunity to earn while they learn. The small matter of bills, mortgages and all the other stuff that involves money, does tend to make it unattractive to join if you cannot put food on the table. The Life Insurance sector does not need highly qualified on paper, University Graduates who might decide to look at risk advice in 4 years. It needs people who have life experience that can make a difference in peoples lives now, by educating them on the importance and need for Insurance. This does not need a plaque on the wall to achieve what is needed. It requires the people in positions of power to make the simple changes required to make it happen."
Jeremy Wright 16:32 on 31 May 23