New research released by industry campaign Choice & Access to Life Insurance (CALI) warns that if governments and regulators fail to act, then underinsurance will continue to increase across parts of the community as access to advised life insurance becomes further limited.
Middle to low income earners, who the research shows already to be underinsured, are increasingly unable to access much-needed financial advice during key life moments like buying a home, starting a family, or transitioning to retirement.
The key findings of CALI’s Challenges confronting the Australian Life Insurance market white paper, which is based on independent research conducted by NMG Consulting and Colmar Brunton, reveal that:
- Most Australians agree life insurance is important. The community views adequate life insurance protection as being enough to secure existing quality of life, enabling people to ‘reset’ after a negative life event.
- There has been significant regulatory disruption to the life insurance landscape, which has resulted in access to life insurance through banks, direct from insurers, through superannuation funds and financial advisers becoming more limited.
- Significant demographic pockets of underinsurance are already emerging, with one in five younger Australians aged 25 – 35 currently considered underinsured compared to community expectations.
- Similarly, 20% of middle-aged Australians (35 – 44) have less life insurance than levels the level the research shows the community believes to be necessary (the community standard).
- Most ordinary Australians cannot afford to pay an upfront fee for financial advice, and, if trends continue, may not be able to access a financial adviser to help them identify their life insurance needs.
- The declining number of financial advisers are increasingly focusing on fewer, higher value customers. On the current trajectory, within three years, only the wealthiest 15 per cent of Australians will be able to access life insurance with personal advice.
- Underinsured people risk leaving their dependants facing severe financial hardship, if they prematurely die or become unable to work.
The research was commissioned by CALI to better understand community expectations about life cover, trends in the Australian market, overseas experience, and the impacts of recent regulatory changes.
The members of CALI are calling on the Australian Government and industry regulators to take the research findings into account when considering future policy decisions, to ensure the right life insurance and access to affordable financial advice is available to all Australians, now and in the future.