Another life insurer exits dwindling risk advice space

In an email to its partners on Tuesday, Integrity Group Holdings (IGHL) confirmed that its wholly owned subsidiary Integrity Life Australia (ILAL) will no longer be writing new life insurance policies in the retail advised and corporate group insurance channels.

“This has been a very difficult decision,” said Sean McCormack, managing director and chief executive officer.

“The Integrity board and leadership team have been actively reviewing the strategic direction of the Integrity Group and have considered and progressed a range of options. Regrettably, none of these options enabled Integrity Group to remain open to new business.

“Protection of policyholders is critical and as such, the board has taken the difficult decision to close to new business in the retail advised and corporate group channels.”

Mr McCormack said the decision was based on the dwindling number of advisers providing risk advice.

“As you will be aware, the retail advised channel has seen a substantial reduction in the number of financial advisers providing risk advice over the last five years,” the CEO explained.

“The number of lives insured across all channels has also substantially reduced and the market decline means that scale is critical.

“Achieving scale requires significant ongoing investment and we have reached a point where it is not in either the policyholder or shareholder interests to continue to write new retail advised policies.”

Mr McCormack added that given the challenges with the retail channel, the group has also taken the decision to cease quoting for new corporate group insurance business, in order to maintain its capital base for the benefit and protection of existing policyholders.

For the retail advised channel, the changes will take effect from 29 September 2023, while those in the corporate group channel are immediate.

“Please know, this decision has not been taken lightly,” Mr McCormack said.

The Life Insurance Framework (LIF) has been blamed for the shrinking risk advice space, with the Association of Independently Owned Financial Professionals (AIOFP) campaigning for its removal.

Earlier this year, AIOFP executive director Peter Johnston branded LIF “arguably the most destructive consumer legislation ever passed”.

“We believe it was not a case of unintelligent politicians making mistakes but the first stage of a deliberate strategy to remove financial advisers from the consumer relationship,” Mr Johnston said at the time.

He has since argued that the LIF is deterring advisers from writing risk cover.

“Emphatically, LIF has NOT been beneficial to consumers,” he said.

According to Mr Johnston, in order to ensure more advisers return to risk, commission levels need to be lifted to “at least” 80/15 per cent and consumers should be given a “clear choice” between a commission or a fee for service formula.