Ageing population and consumer ambivalence to insurance revealed as ‘greatest challenge’ for life insurers

Survey of superannuation and insurance professionals at AIA Australia’s Group Insurance Summit reveals new challenges facing industry

Insurance identified as a significant issue for Australia’s ageing population.

Australia’s ‘greying’ population combined with continuing lack of awareness about the importance of insurance have been identified as the two greatest challenges for the life insurance industry, according to a new survey. 

Superannuation and insurance professionals at the recent AIA Australia Group Insurance Summit were asked for their views on current and future issues in life insurance, and what role the insurer should play in addressing these. 70 per cent said that consumer uncertainty about the need for life insurance and the impact of an ageing population on the level of claims would be critical challenges to be overcome. A further 15 per cent of respondents said members inadvertently losing cover by consolidating accounts or switching to SMSFs would be the third biggest concern for the industry.

AIA Australia General Manager, Life Insurance, Damien Mu said the results show that life insurers must work as a collective to address these issues.

“According to the United Nations, life expectancy in Australia is the fourth highest in the world, and by 2036 it is predicted that around 1.1 million Australians will be aged 85 years or over[1]. This is a huge demographic shift. We must continue to promote the value proposition that’s at the heart of life insurance – protecting the lives of Australians – if we are to respond to this challenge, but it cannot be done in isolation. We have to work together to ensure that Australians not only have life insurance, but that it is at an adequate level for their future needs”, he said.

More immediate challenges revealed by the survey were the sustainability of premium prices (33 per cent), increasing claims (28 per cent) and poor consumer perception (24 per cent). In addressing these issues, delegates believe improving the claims process and innovating products to provide better value for consumers are paramount, polling 42 per cent and 23 per cent respectively.

Lack of awareness of Occupational Rehabilitation among employers

While 72 per cent of respondents confirmed their insurer operates a rehabilitation program for claimants, major barriers in the implementation of such programs remain. 52 per cent think there is a lack of awareness of occupational rehabilitation from employers, while an additional 18 per cent believe the cost of implementing it is too high. 

“Rehabilitation and return to work programs are vitally important for group insurers, employers and employees. When done correctly, getting a claimant back to work is good medicine and a win for everyone involved,” Mr. Mu added.

Mr. Mu pointed to the launch of a research paper ‘A critical equation: balancing Australian worker health and company wealth’, which draws on data compiled by AIA Australia’s rehabilitation team and addresses some of the challenges faced by businesses in implementing return to work programs. Evidence suggests the key to successful rehabilitation and returning members to work is early intervention – after just 20 days of an employee ceasing work, their chance of returning to work is 70 per cent and after 45 days off work, the chance of returning is 50 per cent. 

Delegates at the Summit were also surveyed on the best means for insurers to demonstrate their value to super fund members. 35 per cent said that simplifying product wording to increase understanding of insurance products, while 20 per cent believed that communicating a stronger message on the importance of insurance was needed. Conversely, just seven per cent said providing more comprehensive cover to offset premium rises was important.

“The Group Insurance Summit gives us the chance to take a pulse on the main issues and challenges facing our industry. Clearly, indifference to life insurance is still front of mind for many, so we’ve got to start thinking differently about how we engage with consumers to create long-term behaviour change. If we can do this successfully, a larger proportion of Australians will have access to affordable, adequate levels of cover, and that has to be our ultimate objective”, Mu concluded.

Click here for more information on this year’s Group Insurance Summit.

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[1] (AIHW 2007: 5‐6; ABS Population Projections, Australia, 2006 to 2101 3222.0).