Increased Insurance Appetite Among Gen Y

More young people are taking up protection, but Australians are still underinsured, the latest research from TAL has found.

The third annual TAL Australian Financial Protection Index has revealed that those aged between 18 and 34 have increased their financial protection score, indicating a rise in insurance appetite. In contrast, the score for Baby Boomers, or those aged 50-69 years, has decreased year on year.

The Financial Protection Index measures Australians’ perceptions of the insurance they hold, and its adequacy against their needs. A score of zero means the household has no form of financial protection; 100 indicates that the household has all four forms of life insurance (life, TPD, trauma and income protection) and believes that they have adequate coverage if they could no longer work due to illness or injury.

The 2015 index score for those aged 18-24 was 22, up from 19.5 in 2014. Similarly, those aged 25-34 recorded a score of 29, up from 27.4 last year. Overall, the 2015 national index score remained relatively steady from last year, dropping slightly from 33.5 to 31.6.

Single person households also increased their scores year on year, which TAL said may be a reflection of concerns about the economy and the potential impact of not being able to work and earn an income due to unforeseen health related circumstances.

…these younger people entered the workforce at a time when post-GFC worries still permeate our culture

“One factor that may be relevant to the higher index scores among younger people is that these younger people entered the workforce at a time when post-GFC worries still permeate our culture,” said TAL Group CEO, Jim Minto.

“It may be that, in a more risk sensitive climate, they are looking to various life insurance options that can support them across various personal risk situations so that they can continue paying their debts and plans and dreams for the future.

“With single person households on the rise, we may well continue to see an upward trend in this group recognising the value they see in life insurance to protect them. They may perhaps be increasingly aware that they only have themselves to rely on and losing their job or experiencing injury will have a huge impact on rent, mortgage repayments and other commitments.”

However, Mr Minto pointed out that despite the gains among younger people, the 2015 index shows that many Australians either do not fully understand the benefits of life-related insurances or, if they do understand it, they are not taking the next step to get the full amount of protection they need.

“Clearly we still have a way to go before Australians understand that life insurance is a highly effective way of protecting assets such as the family home, covering other debts – including credit card debt – as well as safeguarding aspirations such as lifestyle and extra supports for children including education,” he said.