Recent analysis of claims statistics conducted by TAL has revealed customer behaviour that will have a “major impact” on financial advice businesses, according to the life insurer’s aligned dealer group.
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TAL’s insurance cancellation findings show customers are stopping their “living insurance” policies 1.5 years before the average claim is made, discontinuing at the average age of 45 years and claiming at 46.5 years.
Speaking to ifa, Affinia general manager Craig Parker said the findings indicate a “major impact” on the cost for financial advisers on two levels.
“It is an impact on the cost of the advice that is being supplied and the strategy and plans that have been put in place for the client over that period of time, but also it has an impact [on] the continual growth of the adviser's practice,” he said.
“I think the key thing is we are going through, from the industry point of view, a fundamental shift of insurance being a product that is being sold to a solution where true advice comes into play,” he added.
Mr Parker believes advisers can combat the problem of premature cancellation with “ongoing education, ongoing communication with clients… and the ongoing review of a client’s needs”.
“In simple terms, the advice that I am supplied today is going to be different from the advice I am supplied in a year's time or five years’ time because my personal circumstances change,” he said.
“That is where a clear review process needs to be in a place and a clear communication plan has to be in place,” he added.
TAL chief executive Jim Minto said the findings were “disturbing” because they demonstrated how customers who stopped their insurance policies were statistically doing so at a time when they were most likely to need financial protection.
“We know that cost of living pressures are continuing to force people to rethink their domestic budgets but it is very unfortunate that those people who stop their policies for this reason do not see financial protection as essential for themselves and their families,” Mr Minto said.