Wayne Handley (left) and Don Trapnell

Hampered by a reduced distribution network, challenged insurer Integrity Life will cease writing new policies through its adviser and corporate group insurance channels.

Integrity Life CEO Sean McCormack has declined interview requests, but a public statement to the press referred to the declining risk market and loss of adviser distribution network.

It referred to the Life Insurance Framework reforms legislated in 2017, which capped adviser commissions (60 per cent up front for the first year and 20 per cent ongoing), as well as the higher professional and ethical standards regime that made the retail advised channel difficult.

“I’m incredibly sad for the entire Integrity team and our many partners who have supported us, especially in recent years,” McCormack said.

“This is not the news we’d hoped to share however the significant challenges of the Australian life market coupled with the realities of growing a business from the ground up mean that it is necessary.”

The changes for the corporate group channel will take place immediately, while the retail advised channel will take effect on 29 September.

The company is expected to continue running its existing book of policyholders, but industry sources are anticipating the business could come up for sale. Integrity Life was approached for comment on the speculation.

“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,” McCormack said.

“Given the challenges with retail advised, we have also taken the decision to cease quoting for new corporate group insurance business, to maintain our capital for the benefit and protection of existing policyholders,” McCormack said.

Backwater to business

Life insurance advice industry stalwart Don Trapnell, Llenpart Financial principal and former Synchron chair, tells Professional Planner what happened to Integrity Life is endemic to what happened to the life insurance industry in Australia.

“We’re losing advisers, if we lose advisers we lose distribution, if we lose distribution we lose turnover,” Trapnell says.

Integrity Life started in 2019 while McCormack joined in March 2021 after nine months after a 14-year tenure at MLC Life where he was most recently chief of life insurance.

“When Sean McCormack came in [to Integrity] he did a great job of turning that company around but unfortunately they brought him in too late and the world just overtook them,” Trapnell says.

“They were getting traction. We were certain as a retail business we were certainly supporting Integrity Life as we would support as we would support any life company.”

However, the appointment wasn’t enough to overcome the downturn of life insurance distribution in Australia.

“They became a victim of the changes in Australian society in the life insurance industry brought about by the previous Liberal government I hate to say,” Trapnell says.

“I was very sorry to see Integrity cease trading… [McCormack] turned the company around from being in the backwater to actually writing business, just not enough of it.”

Similarly, Bombora Advice managing director Wayne Handley says it’s reflective of the current environment life insurance finds itself in. “It’s a shame,” Handley says.

“It was courageous of them to try and commence a life company in the current environment, but there’s just not enough to go around at present time. Just the very few are doing okay, but the many can’t.”

Handley says without government or regulatory intervention into the risk market it might not be the only instance. “We would hate to see this happen again,” Handley says.

“We have to, as an industry, reflect on this moment because it’s indicative of the market. The regulators have to take a look, this is not what we want to see, and this doesn’t help anyone.”

The Council of Australian Life Insurers, of whom Integrity Life is a member, declined to comment.

Declining streams

Integrity Group, the parent company of Integrity Life, said there would be no change to existing insurance policy terms or conditions, claims process will remain unchanged and the company will continue to meet Life Insurance Code of Practice obligations.

The Adviser Ratings ‘2023 Life Insurance Study’ found only 150 risk specialist advisers and 949 that were “largely specialised” in providing risk advice. Another 2372 provided “some” advice on life insurance.

Citing the NMG Risk Distribution Monitor reports, Integrity said the reduction in adviser numbers has led to a reduction in the contestable business pool from $532 million (rolling 12 months to December 2018) to $267 million (rolling 12 months to March 2023).

Integrity cited APRA figures that saw the decline in retail advised clients decline 24 per cent in death insurance, 16.7 per cent for total and permanent disability, and 15.5 per cent for income protection since June 2018 to the end of last year.

From June 2018-2022 retail advice lives insured declined from 5 million people to 4.1 million, according to APRA data.

Integrity grew from 59,000 insured clients with $22.2 million in premiums from March 2021 to 185,000 and $140.3 million by June 2023.

One comment on “Risk advice stalwarts lament Integrity Life exit”
    Jeremy Wright

    It is a sad day for all Australians that Integrity Life has had to cease writing new policies and they should never have been put in that position, when there are multi-millions of potential customers out there not being helped to attain their Life and Disability Insurance needs, because the Government made the provision of Life Insurance advice too hard, too complex, too restrictive, too expensive and for possible new entrants to become risk Advisers, a single path of a journey through a maze of University requirements that NO-ONE has been able to articulate “WHY” should they endure all this time and cost to get a glossy bit of paper when most of what is being forced upon students, has little or nil bearing on the work they would perform.

    We warned years ago what would happen if the insanity of red tape and road blockages would continue, which would see thousands of Advisers leave the Industry, which they did.

    We warned that the road blockages for new entrants who would like to provide risk advice only, would mean that very few students would bother to enroll, which has also proven to be correct.

    We also warned of the impacts if there were insufficient Advisers to write New Business and to look after existing clients, which once again we were ignored.

    Now, even after all our predictions came true and our solution we have been yelling from the rooftops of separating risk advice from Investment advice and making the upfront and ongoing education requirements, specific to the work performed, which will make it feasible for people with life experience and a history of actually working in the real world, to be able to join and help rebuild the tattered Life Insurance Industry, is still being ignored.

    So what we have today and over the last few years, is the result of all the “Improvements” to make the provision of Advice more accessible and affordable, which is twelve thousand Advisers exiting the Industry, virtually NIL new risk advisers coming through the University pathway and other avenues for entrance blocked, with the end result of premiums doubling, remaining Advisers being dragged into remediation mode where angry clients are ringing and demanding something being done to fix what they regard as outrageous renewal premium increases and Advisers feeling all they are doing is putting out fires, with no time to pursue true New Business in the Life Insurance space.

    The solution is simple, it is transparent and needs to be acted on NOW.

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