Adviser Ratings has partnered with insuretech Numerisk to argue the case for high quality advisers to show they are less of a risk to insurance suppliers, in a bid to solve the issue of rising PI insurance costs.
The joint venture aims to demonstrate the quality of advice to insurers and Adviser Ratings founder Angus Woods tells Professional Planner data captured over the past six years shows the level of quality of Australian advice practices.
“It’s the first time from a data point of view that the market or insurers have access to data of this level of depth,” Woods says.
The partnership has been in the works for the last four years, due to the undersupply of PI insurance following the Hayne royal commission.
“There’s an absence of insurers in the market despite the fact the quality of advice has gone up,” Woods says.
Numerisk founder Richard Silberman says that although the advice market has improved, the conditions around pricing and coverage have not followed suit.
“That will work really well with existing insurance to try and get better results, but we need more insurers, so we need more solutions,” Silberman.
The product was also the result of negotiations with Lloyds in London, as well as Keystone Underwriting, which will rely on Adviser Ratings data to help influence pricing and conditions.
“If you’re a quality adviser it’s going to come through [Adviser Ratings] data and we will be able to work with practices exclusively to be able to hopefully achieve a better outcome, whether that’s coverage, terms and conditions, or pricing,” Silberman says.
Despite the perception of self-licensed and licensed advisers to the minds of insurers, with the former being looked at more favourably, Silberman says the Business Intelligence rating is “agnostic” to adviser and business structures.
“Whether or not they’re institutional licensees, mid-market or self-licensed – the way we’ve centred around this is around quality.
“We’re trying not to get caught up in traditional underwriting mechanisms insofar as we like small or big or the way that insurers have operated in the past. We’re trying to turn that on its head.”
Woods say the specific methodology is confidential to prevent gaming of the system but was formed by an independent committee separate from Adviser Ratings that reviews the data.
“It’s never going to be static, the more and more data that comes into the mix, the more and more that you can start to improve the metric over time,” Woods says.
The fall out of the royal commission led to a raft of providers withdrawing their services in late 2019, which Silberman says left the sector as being “pretty dry and desolate”.
“We would categorise as saying it’s been very, very difficult for a number of years,” Silberman says.
“However, there is some improved conditions but its patchy and its inconsistent. It’s not really where it needs to be. We’re probably two or three years away from being in a market environment that would be typical of other professional services, assuming there isn’t another big event.”
