Advisers Challenged to Ensure Trauma Cover Lasts Longer


Adviser and industry consultant, Chris Unwin, has called for a major shift in the way trauma insurance is marketed to consumers in Australia.

In reflecting that trauma insurance in Australia is “… desperately undersold by advisers and therefore largely unappreciated by clients,” Mr Unwin advocates a solution that centres on level premium policy structures.

Mr Unwin told riskinfo his ‘lightbulb moment’ was revealed to him when he compared the status of trauma insurance in the UK to the Australian market.

In the UK, Mr Unwin points to the 25% of the working population who hold trauma insurance, compared with only 2.5% in Australia. One key difference between trauma insurance in the two countries, according to Mr Unwin, is that there are no stepped premiums available for trauma policies in the UK, while the vast proportion of trauma policies in Australia are written with stepped premiums.

“So it is not surprising that 25% of the working population in the UK have trauma insurance,” said Mr Unwin, as : “… most people who bought trauma insurance in their 30s and 40s still have it in their 50s and 60s because they are still paying the same amount for it”.

In encouraging advisers to consider this approach towards providing trauma insurance to their clients, Mr Unwin suggests two practices:

  1. Show every client the cumulative premiums payable to age 65 (both stepped and level) and ask the client how they would rather buy it, given they want to own it for as long as possible
  2. Explain to older clients who cannot afford to buy all their trauma cover on a level premium that it doesn’t have to be all or nothing – that they should buy as much as they can afford on a level premium and the balance on a stepped premium, with a view to converting their stepped premium trauma cover to level premium as and when cash flow may permit

Mr Unwin noted that over 85% of trauma policies in Australia are bought on stepped premiums, which is why the average age of purchasing trauma insurance is around the mid 30s and the average age of lapsing trauma insurance is mid 40s because it has become too expensive.

“The tragedy of this is that most clients are having to cancel their trauma insurance at the very time that they are entering the phase of their life when they are most likely to suffer cancer, heart disease or stroke, and this likelihood will increase exponentially each year thereafter,” said Mr Unwin.

While he acknowledges there are other important differences between the UK and Australia, such as the relative lower cost of public health care in Australia, one answer from Mr Unwin’s point of view to solving the lack of sustainability of trauma insurance in this country is to promote level premium trauma insurance and work to maintain the policy for the client well beyond age 45.