Insurance disruption comes to Australia

OF ALL the financial markets, insurance has surely been one of the least disrupted by modern innovation. So far.

How disruptive would it be if an insurance broker not only established business insurances at rates lower than the incumbents, but also gave the insured company back the commission to which they would have been entitled?

And how disruptive would it be if an insurance expert could demonstrate how the group life insurance premiums of the major banks, and big insurers like AMP, were pumped up higher than the independent life insurance companies – who need to compete in the open market.

Australia’s insurance industry is about to find out, with the innovative new system developed by insurance industry adviser, Johnny Grohovaz, finding favour out in the market.

Mr Grohovaz’s research has shown that the ‘big four’ banks and AMP control between 60-80 percent of life insurance distribution via advisers in Australia.

“As such, it seems that they do not compete on price as much as independent life insurance companies have to,” Mr Grohovaz said. “The independent companies are more cost-efficient because they have to compete in the open market.”

To prove his point, Mr Grohovaz has compiled a table of quotes, based on an average customer who is an accountant by occupation and compared them with quotes for similar occupations off Life Risk Online, which is an independent provider of life insurance quotes for advisers.

“There is around an 11 percent difference between the average top five prices – all from bank  or AMP-owned providers, to best premiums from more competitive life insurers,” Mr Grohovaz said.

He pointed out from the table that both ANZ’s One Path and Suncorp’s Asteron proved to be more competitive in price.  

Mr Grohovaz’s system takes finding the lowest quote to a new level as he has introduced commission premium rebates to clients – money that would ordinarily go to the advisers.

“With the level of research we can access to find lower premiums in the first place – and our commission refund policy, there is fair scope to reduce costs,” he said.

“For example, an organisation paying $1000 a month at the moment from one of the big banks’ insurers would be able to get the same level of cover from independent insurers for $891. That works out to be an annual insurance premium reduction of $1302.

“However, that combines with a commission refund from us that takes another $1605 from the annual payment. That is an effective annual reduction of $2907, or 24 percent saving.”

As an example, Mr Grohovaz has prepared a table to illustrate the reductions in monthly premiums that are possible through the new system:

www.youfin.com.au

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