New research: Evolving workforce and ageing population demand new solutions to financial hardship problem

From

Tim Bailey

Zurich Insurance Group (Zurich), in collaboration with the Smith School of Enterprise and the Environment at the University of Oxford, has published a new report, Embracing the income protection gaps challenge: options and solutions.

The study, based on extensive research, outlines practical recommendations to address critical issues and gives insights into how governments, employers, insurers, financial advisers and individuals can work together to close the underinsurance gap and safeguard financial security at an individual and community level.

Australia is one of 12 countries assessed in this third iteration of the international research.

The findings show the need for solutions is urgent, with extended working lives putting individuals at increased risk of becoming disabled during their career. Chronic sickness, injuries or other conditions can prevent or impair a wage earner’s capability. With government resources constrained, and a growing number of people working part-time and temporary jobs, people are increasingly at risk.

Tim Bailey, CEO of Zurich’s Australian Life and Investments business, said, “Our research shows that several factors are aggregating to put the financial security of many Australians at risk as they age. Unfortunately, this is at a time when governments in developed nations are generally spending less on welfare benefits in response to the increasing cost of an ageing population. This presents a real challenge to society. We all need to act to foster and implement solutions.

“Inadequate and/or inappropriate life insurance cover could expose Australian families to the serious risk of depleted household budgets, and the erosion of savings accounts and retirement balances. The burden of guaranteeing long-term financial security is simply too great for many individuals to bear,” he said.

The central theme of report is the importance of balancing the responsibilities assumed by governments, employers, insurers, financial advisers and individuals in protecting household income.

The key recommendations of the report include:

  • For insurers: To promote best practice, offering Life Code compliant products and building in transparency and simplicity to help build public trust in life insurance offerings.
  • For employers: To take a lead role in the financial education of employees and embed corporate wellness programs
  • For governments: To incentivise employers to invest in medical monitoring and health and fitness programs, and do more to raise awareness of mental health issues and improve the mental health of the community.

The research report gives global recommendations for filling the IPGs and provides insights and solution for 11 countries alongside Australia, being: Brazil, Germany, Hong Kong, Italy, Malaysia, Mexico, Spain, Switzerland, UAE, the US and UK.

Earlier reports found that next to other countries surveyed, Australians:

  • Were the least financially literate;
  • Were the most likely to see themselves as ‘bullet proof’ and not needing protection; and
  • Had the most belief that government safety net mechanisms would be adequate for their needs.

Commenting on the findings, Mr Bailey said, “Improved financial literacy is clearly a critical driver of financial security, not just for individuals, but for society too.

“In this respect the recent Government announcements around the strengthening and extending of the ASIC Moneysmart program are very encouraging, although there is clearly more to be done by all stakeholders,” he said.

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