Martin Le Tessier (left) and Jake Wilkins

Holistic advisers are shying away from writing more risk, meaning that a mere 493 advisers wrote half of all life policies this year. But what’s behind this trend that could potentially lead to huge underinsurance among Australians?

The 493 figure comes from Adviser Ratings data from September, while only 6373 advisers wrote a policy in the first half of 2023.

Research currently being conducted by Marc Fabris, the founder of Risk Hub, shows that the main reason is the viability of writing risk. “A close second is compliance,” he says.

“Then not too far behind are the difficulties of pre-assessments and underwriting of policies.”

Marc Fabris

Fabris adds that the cap on life insurance commissions – 60 per cent on the initial premium and 20 per cent thereafter – has weakened the affordability of risk advice and driven advisers away.

Charging an extra fee can be hard to justify despite the amount of work that goes into providing the advice, he says.

Martin Le Tissier, a financial planner from Purely Finance, says risk advice is only marginally profitable compared to investment and superannuation advice.

“This is partly due to the time-consuming nature of this advice,” Le Tissier says.

“By comparison, the implementation of investment business is usually very straightforward forward, simple and time frames are easily guesstimated.”

He adds that risk advice can be only halfway through the journey by the time the application form is taken.

“Underwriting, dealing with amended terms, following up payment arrangements/cancelling old covers and so on are often tied to unknowns and can take hours,” Le Tissier says.

Fabris also believes risk advice is time-consuming, noting that large insurers can be slow in processing manual pre-assessments and doctors can be sluggish in providing medical reports.

According to Jake Wilkins, a financial adviser at Jake Wilkins Financial Planning, providing risk advice has become a specialty knowledge area in recent years.

“The products have drastically changed and there have been product mergers, exits and new providers entering the market,” Wilkins says.