Banks, insurance firms financial advisers' main competitors

Banks and insurance companies remain the biggest threat to insurance advisers in spite of the rise of online insurance sales, according to a new survey by Horizon Research.

Niko Kloeten, reports through the Good Returns information service that the survey, commissioned by the New Zealand Financial Advisers’ Association (NZFAA), found a strong preference from consumers for going direct but little appetite for buying their insurance online.

Conducted via an online panel of more than 2400 people aged 18 and older, the survey found one in six people (17%) hold no insurance or financial products. Fire and general insurance products weren’t included.

Respondents held an average of 2.5 products, while those who made their arrangements through a financial adviser had an average of four products.

But only a small proportion of people used independent financial advisers to buy their insurance, ranging from 13.6% for mortgage protection to 23.4% for life/trauma/disability cover. 

Only 5%-7% bought their insurance directly online, with the majority of consumers arranging it either over the phone or in person from a bank or insurance company, or through an adviser at a bank or insurance company.

The survey found 23% of those who didn’t currently use an independent adviser used to have one, while between 13% and 21% of those who used an adviser for their current insurance would not use one next time.

Respondents offered a number of reasons for not using an independent financial adviser. Key reasons included approaches from banks and insurance companies and a view that it was “more convenient to do it myself”.

About 20% of those not using an adviser said they didn’t see the value in engaging one.  However, only 2% of people said they didn’t use one because it was easier to arrange their insurance online.

Horizon Research manager Grant McInman says the results showed online-only options did not appeal to many people.

“People generally want to talk to someone whether it’s over the phone or face-to-face,” he told the NZFAA conference in Auckland.

The survey also looked at what made people unhappy with their financial adviser, and it found a “general perceived lack of industry stability” to be a bugbear. 

“People talk about mergers  and companies selling the book,” McInman said.  “They say they don’t know who they’re dealing with and it’s all changed.  To customers it can denote a degree of instability in the market; ‘it’s changing faster than I can keep up with and I don’t want that.”

Commissions were also a factor causing grumbling among some clients.

“There were comments that people only get contacted by their adviser when they have a new product to sell them to get more commission.”