MLC Life Insurance calls for action on adviser exodus

Speaking at the FSC’s virtual Life Insurance Summit on Monday, MLC Life Insurance chief life insurance officer Sean McCormack said the risk advice sector was facing a major “talent challenge”, with the exodus of retiring advisers having significant “downstream implications” on new business for life insurers.

“The consequences are quite crucial – in 2019, 5,000 advisers exited the industry and just 38 joined, and in the first quarter of this year 950 advisers existed with just 12 joining,” Mr McCormack said.

“We know we’ve got challenges attracting talent to the life insurance industry, and I think the advice industry is seeing some of those talent challenges coming through as well.

“And what we’ve seen over the last five years is new business premiums have reduced by 60 per cent, which is a significant impact on insurers that are managing the delicate balance of our insurance pools, and it’s a substantial change from an expense perspective.”

Mr McCormack said advisers were under significant strain as a result of decreasing margins in the industry, as well as the challenges of an onerous new education regime.

“I’m deeply concerned with the toll this is taking on the advice community – many advisers feel their sense of identity is being stripped away through the challenges of the past couple of years,” he said.

He added that insurers should be taking action to make the advice process as painless as possible for those who remained in the industry, and should oppose any further cuts to commissions in the lead-up to ASIC’s 2021 review of the LIF.

“Firstly, how can we work on reducing the costs of advice and fulfillment and make that process as efficient as possible on our end? We did some research with Plan for Life that indicated that the cost of advice needs to reduce by 20 to 25 per cent for risk advisers to make it profitable,” Mr McCormack said.

“The LIF review is also a good opportunity to talk about the consequences of remuneration, because i’m concerned if we eliminate the commission model we’ve got in place that will further exacerbate a looming availability issue.

“For us as an industry and regulators, it’s important we ensure good risk advice doesn't become the domain of the wealthy, it’s there for the many and we don’t want it to become the domain of the few.”