The changing composition of practice revenue

Trends in insurance

Revenue from insurance advice is shrinking as a percentage of total practice revenue with advisers ramping up their focus on superannuation, investing and retirement planning, ahead of the introduction of the Life Insurance Framework, according to Investment Trends.

Risk revenue is expected to fall to just a quarter of practice turnover by 2019, down from 32 per cent in 2015, based on the 2016 Investment Trends Planner Risk Report.

According to King Loong Choi, senior analyst at Investment Trends, insurance advice continues to be a significant contributor to practice revenue but advisers are increasingly broadening the scope of advice they provide.

A growing number of risk specialists - defined as those who derive over half of practice revenue from insurance - plan to provide more holistic advice, charge higher holistic advice fees and target clients with more complex insurance and financial needs.

The report also found the shift away from upfront commissions has accelerated in the past few years with the proportion of insurance revenue derived from upfront commissions falling to 41 per cent in 2016 from 46 per cent in 2015. By comparison, hybrid commissions represented 36 per cent of risk revenue in 2016, up from 28 per cent in 2015.

“These trends are expected to continue with 44 per cent of planners expecting LIF to negatively impact their profitability while only 19 per cent see LIF as an opportunity to boost profitability,” Loong Choi said.

“Planners expect upfront commissions to represent only 10 per cent of insurance revenue and hybrid commission to contribute more than half of revenue by 2019.” 

Life and TPD 

Life and TPD policies represented almost half of all new risk business in 2016 while income protection and trauma cover represented 32 per cent and 17 per cent of new premiums respectively, the Investment Trends report found.

Standalone life insurance accounted for only 11 per cent of new insurance premiums, the lowest level since the report’s inception, indicating that clients are increasingly recognising their need for more comprehensive protection.  

We want to hear from you

To keep up-to-date with the needs and sentiment of advisers, ClearView is participating in the annual Investment Trends Planner Risk Survey this year.

We’re keen to learn more about what you want and need from your life insurance providers in order to drive efficiencies in your practice, lift productivity, adapt to LIF and boost client satisfaction.

To access the survey, please click on the link below.

As thanks for your time and contribution, you’ll be sent a summary report of the survey’s findings later in the year. This high level report will provide some insight into the challenges and opportunities your peers are facing, how well the industry is adapting to regulatory changes and general business performance.  

You’ll also be entered into the draw to win a $3,000 Flight Centre gift card or one of 10 $200 EFTPOS gift cards. This year Investment Trends is also giving away a $200 EFTPOS gift card to the 10 most comprehensive survey respondents.

King Loong Choi is a senior analyst at Investment Trends.