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Life insurance gap beginning to close in Australia

Fri, 01 Jul 2011 04:25:49 +0000

New report from Rice Warner reveals increasing levels of personal insurance

Australia’s life insurance gap has reduced over the last six years, according to a new report from Rice Warner Actuaries.

As at June 2010, the overall level of underinsurance is $669 bn to meet the subsistence needs of families and dependants after death, which compares with $1,000 bn in 2005 on a like for like basis – a reduction of 33 per cent over the six years.

On an income replacement basis, the level of life underinsurance is $3,073 bn. Meanwhile, for total and permanent disability (TPD), the level of underinsurance sits at $7,182 bn and income protection underinsurance at $437 bn.

Michael Rice, Managing Director and Head of Strategy of Rice Warner Actuaries, attributes this shift to significant demographic, financial and life insurance market changes over the past six years and in particular, an increased focus on personal financial risks post-global financial crisis.

“Increased levels of personal insurance have been driven by an increase of default cover within superannuation, a greater focus on risk insurance by financial advisers and superannuation fund trustees as well as the growing direct life insurance market,” said Mr. Rice.

However, while the report points to a welcome development in the face of Australia’s continuing underinsurance problem, Mr. Rice warns we’re not out of the woods yet.
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“While the market is now providing a substantial proportion of subsistence life insurance cover, this is still only half the amount of cover required to ensure that family members and dependents can maintain their standard of living after the death of a parent or partner,” explained Mr. Rice.
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“Apart from individual detriment, underinsurance also comes at a substantial cost to the government. Currently the total cost to the government of life underinsurance across Australia is calculated to be $140 million per year as publically-funded social security benefits fill the gap. Meanwhile the situation regarding disability underinsurance is even more serious, costing the government nearly 9 times this amount!”
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Mr. Rice believes there are things the government could do in the short term to remove glaring distortions and inequalities in the market in order solve this ever-present problem.
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“The underinsurance issue would benefit from the government considering the removal of stamp duty from all life, total and permanent disability (TPD) and income protection policies; removal of GST on TPD and income protection products sold by General Insurers; equalization of the tax treatment of risk insurance inside and outside superannuation; and implementation of the proposed ‘scaled advice’ model with a particular focus on risk insurance.
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“While the report proves the issue of underinsurance is still a significant one for the financial services industry and the government in Australia, it also reveals a positive step in the right direction.”

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Bridging The Gap: AFA/Tower launch Female Excellence in Advice Award

Fri, 06 May 2011 07:35:18 +0000

The Association of Financial Advisers (AFA), TOWER Australia and the Macquarie Graduate School of Management officially launched the AFA Female Excellence in Advice Award (the Award) in Sydney last night.

The Award is designed to encourage more women to consider financial advice as a career, to champion those who excel at it and to take the first step in tackling the gender gap that exists in retirement savings, wealth protection and life insurance.

Special guest speaker, Professor the Honourable Jennifer Boland said that despite steps in the right direction, the gender divide still exists.

“I am encouraged to see initiatives such as the Female Excellence in Advice Award because it encourages not only participation but excellence in what has, traditionally, been the male-dominated arena of financial services.”

AFA CEO Richard Klipin said the idea for the Award was born because of the under-representation of women at all levels of the financial advisory profession. “We want to encourage all women to consider becoming involved in financial advice but in particular, we want to see higher rates of participation at a leadership level,” he said. “The Award seeks to actively encourage more women into the industry so they are better represented within the ranks of financial advisers and better able help women secure their financial future.”

Brett Clark, CEO Retail Life of TOWER Australia said that research suggests women are significantly underinsured and generally have inadequate retirement savings, yet they often have higher protection needs and can expect to live longer lives than their male counterparts.

“TOWER statistics reveal that although women make up 45% of the Australian workforce, only 12% of TOWER Australia income protection claims come from women,” he said. “These statistics have significant social and fiscal implications for us all.”

Kerry Chikarovski who is Patron of the Award said she is delighted to be a part of the Awards process. “Efforts that help women become more successful, personally and professionally, are few and far between,” she said. “I applaud the AFA on this initiative and am personnally honoured to be its Patron.”

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Bushfire Action Weeek reminds Victorians to get Lifewise this Summer

Mon, 11 Oct 2010 07:50:04 +0000

With 95% of Australian families having inadequate life insurance, Bushfire Action Week is a reminder to all about the importance of protecting the family against the risks associated with bushfires.

The launch of Victorian Bushfire Action Week (10th-17th October) today serves as a reminder to all of the importance of protecting the family against unexpected risks, says Lifewise, a long-term public awareness campaign aimed at educating Australians about the importance of life insurance.

During Victorian Bushfire Action Week, Lifewise is reminding Victorians about the importance of reviewing their levels of life insurance in order to minimise the impact that bushfire risk has on their families.
Lifewise Chairman, John Crosswelll, said: “The tragedy of last year’s Victorian bushfires reminds us of the need to protect ourselves against financial hardship that can result from bushfire. There are many simple steps that can be taken by Victorians to ensure that in the event of tragedy, this hardship is kept to a minimum. One of these includes the less obvious precaution of reviewing life insurance needs.”

Lifewise statistics show that because families did not have adequate life insurance, the life insurance payment received by the families of the 2009 Victorian bushfire victims was only $119,000. This figure is relatively low when compared to the average Victorian mortgage which is valued at $360,000. In fact, because of underinsurance, less than 50% of bushfire victims received any kind of life insurance payment.

“The impact of underinsurance cannot be underestimated. Under normal circumstances, most families would be unable to meet their financial obligations after three months in the event of the premature death or injury of the family’s main breadwinner which renders them unable to work. For those families obliged to live through the aftermath of a bushfire tragedy, this presents a financial burden that would add considerable additional strain on the family.”

Victorians can visit the life insurance calculator to find out how much is enough and can find out about the different types of life insurance that may benefit them at www.lifewise.org.au.

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