Has Consumer got it right on insurance and advisers?

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Consumer has released its latest insurance provider satisfaction survey. Adviser Jon-Paul Hale reckons it has lots of speculation and opinion but little real substance.

Friday, February 4th 2022, 9:00AM 4 Comments

by Jon-Paul Hale

But that has become what we expect of Consumer when it comes to financial services, especially insurance.

So what's piqued my interest? A few things.

We first need to take on board the overall satisfaction consumers have with providers; of all the things we complain about with the report, this is the bit that we have to take on the chin.

Consumers think service from insurers is horrible, and as an adviser dealing with insurers every day, they are! By the measure of a business with good customer service.

But as a comparison between them, they all have poor customer service. Yes, many have awards for customer service compared to others in their industry. The bar is not high!

But we say similar things about our power and telco companies too. They have the same problem.

The first thing I'm going to grind on is Sovereign's 13% satisfaction score. TBH it's higher than I would expect for a company that no longer exists. Yes, it would seem the policyholders that answered these questions need more education on who their insurer is, but that's somewhat expected.

My question is, did those doing the survey look at the market they were surveying or did they run with what they thought from past results? Because I recall much of how I feel about this report is about the same as the rest before it.

The gem I found interesting is; "You were much less likely to think your insurer was doing a good job if you bought life cover from a broker or bank. Just 19% of those who bought life cover from a broker or financial adviser were very satisfied with value for money. Similarly, only 16% who bought from a bank were happy with the service they received."

And; "We think these low satisfaction scores are likely linked to commission-based sales of life insurance"

Yet, of the ones I can see in the report, MAS is the only insurer that is direct to the consumer with advisers, and they cater to a market that they throw money at.

So sure, Consumer, blame commission when the business rated well is throwing money at its clients—and charging interest for that money.

But Consumer thinks it's commissions, that's the reason why satisfaction is so bad. Cry me a new one. We know from much research that the remuneration approach essentially has little to do with the actual outcome for consumers.

Yes, some things are undesirable with commission, as with every other approach. At the same time, commission isn't the reason for this result.

AA Insurance resells someone else's cover, so does AON; Cigna has a direct arm and the bank and broker distribution options. So why aren't they rated higher if it's commission?

Foundation Life is a company that buys and holds whole of life policies, policies that are not open for new business and are an investment for their policyholders rather than insurance in the true sense of the word. The lives assured are not the policyholders anymore.

MAS will have sales targets internally, it may not be commission, but it is still an incentive.
Partners Life and Asteron Life pretty much only deal through advisers on commission, yet their customer satisfaction wasn't questioned by Consumer and was above average?

Service and satisfaction are relative. The older the policies, the worse they are for the consumer and the more they will complain. Companies with legacy covers that can't be updated without significantly raising premiums will always have gripes. People hate that their health prevents them from accessing a better cover.

And the banks, that one is a no shit, Sherlock, bank provided covers have been basic and ill-advised for decades. But they serve the purpose of some cover while they get found by an adviser. 

Of them all, Fidelity Life has probably got the least deserving rating, they're a good company that does good things, but they have had a rocky few years too.

It's clear that Consumer is continuing to grind its axe on commission; it's an easy target when they don't understand how the industry works.

When the FMA and government come out after extensive investigation and say, "you guys and gals do good work, and you should be paid for it", without attacking or changing the commission approach, it should be a given that commission is an effective remuneration tool for the work we do.

Naomi Ballantyne from Partners Life has said many things about remuneration, and her comments on commission have been consistent.

Is commission without flaws, nope, never claimed to be. It is the least flawed for creating harm than the alternative options for a sustainable industry.

As to how much commission is needed? We have new rules; those new rules come with increased costs directly on the business and increased time to get the job done. All of this adds up to less income and profitability per client, which means it's not surprising that commission rates have increased at the principal adviser/business level with the new rules to help.

We have an interesting year ahead, I'm not sure how Consumer is expecting us to be paid for the work we do, but we need to have profitable businesses for us to be here to help our clients. If not, we'd get a job doing something else.

Our industry is about two things, our loved ones and looking after our loved ones. Be it as an adviser or a client; the alignment is like no other profession.

Tags: Opinion

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