David Sarkis
Australians are questioning the value of their life insurance, turning to their financial advisers to help them decide whether to cancel, reduce or retain their life insurance cover.
A perfect storm of rising interest rates, the cost-of-living and premium hikes, coupled with demographic and health changes, has left many Australians unsure of the value of their life insurance policy.
According to iExtend CEO David Sarkis, this uncertainty is making more Australians waiver in their commitment to continue their life insurance cover, who view it as more of a liability than an asset.
“As a result of a range of financial and demographic pressures, we have seen more Australians change their view of their life insurance and are seeking to cancel it.”
According to the Council of Australian Life Insurers, 68% of Australians are concerned that cost of living pressures will impact their ability to afford or continue paying life insurance, in comparison 23% of Australians would consider cancelling their life insurance if affordability were to become an issue.[1]
“The impact the cost of living is having on life insurance cannot be underestimated, with many Australian households feeling the pressure of daily life, leading them to consider cancelling their policies to alleviate the immediate burden of meeting premium payments,” said Sarkis.
Seven key factors driving policy cancellations are:
- Rising premiums – Life premiums are expected to increase by 1.5% in 2025 in advanced markets while in emerging markets like China, India, and Latin America premiums could increase by 5.7%.[2] This outlook erodes confidence in the value of sustaining life insurance for the long-term.
- Increased prevalence of chronic health conditions – Two in five Australian workers (39%) are living with a chronic condition.[3] A change in health circumstances and the decision to cancel a life insurance policy, are two requirements of iExtend’s qualification criteria.
- Aging population – By 2066, people aged 65 and over will make up between 21% and 23% of the total Australian population.[4] As Australians get older, issues such as insurance and estate planning become more top of mind for more Australians.
- Cost-of-living – The monthly Consumer Price Index (CPI) indicator rose 2.3 per cent in the 12 months to November 2024, up from a 2.1 per cent rise to October.[5] Sustained financial pressure has many Australians looking for ways to cut discretionary costs.
- Intergenerational wealth transfer – The Productivity Commission estimates the transfer of intergenerational wealth to be $3.5 trillion in assets by 2050.[6] Wealth redistribution and estate planning will become a major driver of estate planning and in decisions around life insurance.
- Property and business sales – The cost-of-living crisis is one of the key challenges facing the Australian property market in 2025, driving more Australians to sell their property and business, regardless of timing.[7] In this situation, life insurance policies become a long-term asset that can retain some of its value through a co-ownership arrangement.
- Accessibility to advice challenge –With approximately 15,400 advisers in the Australian advice industry, accessing professional financial advice to help Australians evaluate all their financial options before they cancel their life insurance and retain no value is an ongoing challenge.[8]
iExtend offers a unique alternative to life insurance policyholders who have committed to cancelling or reducing their life insurance. iExtend pays all premiums on co-owned life insurance while future claim benefits are shared with the policyholder, their beneficiaries or estate, with the claim split based on how long iExtend has been paying the premiums.
One in four of the policies assessed by iExtend is retained by the policyholder, demonstrating the value that would have been lost and offering a vital retention strategy for advisers who can maintain their commitment to being there when their client needs them most.
“iExtend is working with advisers and their clients to ensure they make informed choices about the future of their life insurance policies, decisions which impact families and generations of Australians,” said Sarkis.
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