Underinsurance Questions

What is the most significant factor preventing a greater take-up of life insurance by Australian consumers?

  • Adverse consumer attitudes towards life insurance and/or financial advice (44%)
  • General economic conditions and affordability (29%)
  • Other issue(s) (10%)
  • Product complexity - it's just too difficult (9%)
  • Life companies failing to learn from the lessons of the past (7%)
  • Adviser remuneration issues, including churning (1%)
  • Not sure (0%)

Our latest poll seeks to apply a perspective to the current debate on the quality of life insurance advice and conflicted remuneration issues, real and perceived.

We’d like to know what you think about why more Australians don’t have life insurance, or don’t hold sufficient cover appropriate to their circumstances. This question has been debated in many ways over a long period, but we want to your 2015 perspective on this nagging problem.

In a few weeks’ time, the industry will be awash with reaction to the recommendations set to be handed down by John Trowbridge, following his consultative process with the FSC/AFA-initiated Life Insurance and Advice Working Group.

It appears almost inevitable that remuneration for life insurance advice is set for a shake-up. The intended impact of any proposed changes will be to achieve a higher-quality life insurance advice process within an environment that removes or minimises any conflicted remuneration, real or perceived.

While advisers and all other industry contributors will have their own views about the Trowbridge recommendations when they are handed down, to what extent will any new adviser remuneration structures ultimately impact the underinsurance dilemma?

APRA’s Deputy Chair, Ian Laughlin, delivered a speech to the Actuaries Institute earlier this month, in which he sheeted a portion of responsibility for inconsistent industry sustainability to the performance of life companies and their failure to heed the lessons of the past (see: Staff Turnover Impacting Insurance Sustainability).

The life insurance industry… continues to struggle to find a way for its ‘value of life insurance’ message to cut through to the general population

Elsewhere, despite ongoing technology and process improvements initiated by the insurers, advisers continue to have issues around the difficulties associated with successfully securing cover for their clients. They regularly tell us there should be an easier way to get their clients covered without compromising the integrity of the underwriting and new business processes.

The life insurance industry also continues to struggle to find a way for its ‘value of life insurance’ message to cut through to the general population. The ongoing struggle to deliver this key message, combined with recent high-profile advice scandals, sees consumers continue to hold an adverse view of both the need for life insurance and the value of financial advice.

While short-term life industry debate will (rightly) focus on the Trowbridge recommendations when they are released, take this opportunity to stand back and ask yourself how the industry should best focus its energies if it is to genuinely collaborate on, and solve, Australia’s underinsurance problem…