December 10, 2013
The median level of disability cover held by Australians represents just 15% of a family’s needs, a study into underinsurance has revealed.
Rice Warner’s latest ‘Underinsurance in Australia’ report found that the median level of TPD cover in Australia is 14% of that needed to fully maintain the standard of living of the family. Similarly, the median level of income protection cover is just 16% of actual needs.
These figures are significantly lower than the level of life insurance cover held by the working age population:
- 62% of Australians hold enough cover to support basic family needs
- 42% hold a sufficient amount to fully maintain the standard of living of the remaining family members
Co-author of the report, Thierry Bareau, told riskinfo there were a number of possible reasons behind the lack of take-up of disability cover:
… the life insurance industry needs to focus on a deeper understanding of individual clients’ insurance needs
“To start with, life insurance is often easier to take out. Income protection often requires more underwriting, and some people may be deterred by the medicals,” Mr Bareau said.
“Life cover is also offered as part of nearly every super fund which means people are receiving a level of cover automatically, without having to take any direct action. And while many super funds now also include TPD cover as a default offer, the levels are not always sufficient.
“Another factor is the increased activity in the direct market, which is largely focused on death only covers.”
According to Rice Warner’s Richard Weatherhead, the figures demonstrate that the life insurance industry needs to focus on a deeper understanding of individual clients’ insurance needs, so that insurance offers can be targeted at those with the greatest need, rather than on raising levels of cover across the board.
“This is particularly the case in relation to disability covers, notwithstanding the government’s new Disability Care Scheme (DCS). The DCS complements, rather than replaces, the need for life insurance cover,” he said.
For more on the findings from Rice Warner’s Underinsurance in Australia report, see: 10 x Income Not Enough.