Australia Amongst Direct Life Insurance Sales Global Leaders: Life Broker

Despite the continuing need to manage potential conflicts among different channels of sales distribution, Australia has joined Germany, South Africa and the UK as a leader in direct life insurance sales.

Speaking earlier this month at an Actuaries Institute forum held in Melbourne, Clarke, Principal Financial Services and Operations at management consultants Oliver Wyman, spoke to the rise of the direct sales channel in Australia. "Direct sales channels are advanced in Australia and are now accounting for about 25% of new business," he said.

Clarke's remarks accompanied "Global Trends in Life Insurance Distribution," a forum presentation co-authored by Clarke and colleague Anthony Bice, an Oliver Wyman Partner who heads the firm's Asia-Pacific insurance practice.

According to the presentation, change in sales models is driven by several factors that affect customers, the industry and the environment. Today's customers, part of an aging population, focus on value and trust, and their use of technology, along with a demand for convenience, has increased. For its part, the industry continues to experience "ongoing tension between distribution independence and control," accompanied by the rise of "new entrants" like online aggregators and direct-sales businesses, according to the presentation.

At the same time, the environment has changed. Clarke and Bice point to the global economic slowdown and "regulation focused on enhanced consumer protection and intermediaries" as influential factors.

Clarke indicated that the growth of direct sales, something that once led to clashes between direct operations and intermediary channels, has become a more accepted phenomenon in the industry. "In Australia you don't have to be an insurer to sell insurance, you just need an advertising campaign," Clarke noted, pointing to the adoption of three business models for direct sales: latent demand, active customer pull and cross-selling.

Each model has its own leading players. Real Insurance and InsuranceLine focus on latent demand, active customer pull has become the province of Allianz and iSelect, and cross-selling has involved the big banks, utilising their existing databases and partnering arrangements with entities like Woolworths and NIB Health Fund.

Despite the rise of direct sales, Clarke points to two challenges facing the industry. First, customers must be effectively served regardless of the channel they use for each step of the process. Second, the industry must work to improve customer handover as customers move from channel to channel. The latter is particularly significant, according to Clarke, because customers often start their inquiries on the Internet, but make their purchases through other channels, especially through company branches and third-party brokers.

Australian companies trying to meet those challenges, according to Clarke, would be well advised to look closely at the experience of overseas companies who have successfully negotiated those same challenges in managing direct sales channels.

Lifebroker is Australia's leading specialist life insurance broker. Helping people find the best cover that's right for them, at whatever life stage they may be. Lifebroker also provides income protection as well as children's trauma insurance. Lifebroker has access to Australia's leading life insurance companies, which allows us to source the best possible cover and price.