Underinsurance Will Worsen, Advice Harder to Access – Report


Regulatory disruption is making it harder for Australians to obtain life insurance and the declining number of advisers means there is a danger that within three years only the wealthiest 15 percent of Australians may be able to access life insurance with personal advice, according to a new report.

Research by new industry campaign group Choice & Access to Life Insurance (CALI) warns that if governments and regulators fail to act, then underinsurance will continue to increase across parts of the community as access to advised life insurance becomes further limited.

A statement from the campaign group, which is backed by Zurich, TAL, AIA Australia and MLC Life along with the FSC, the FPA and the AFA, says that middle-to-low income earners, who the research shows are already underinsured, are increasingly unable to access much-needed financial advice during key life moments like buying a home, starting a family, or transitioning to retirement.

It says that the key findings of CALI’s Challenges confronting the Australian life insurance market whitepaper, which is based on independent research conducted by NMG Consulting and Colmar Brunton, reveal that:

  • Most Australians agree life insurance is important. The community views adequate life insurance protection as being enough to secure existing quality of life, enabling people to ‘reset’ after a negative life event.
  • There has been significant regulatory disruption to the life insurance landscape, which has resulted in access to life insurance through banks, direct from insurers, through superannuation funds and financial advisers becoming more limited.
  • Significant demographic pockets of underinsurance are already emerging, with one in five younger Australians aged 25–35 currently considered underinsured compared to community expectations.
  • Similarly, 20 percent of middle-aged Australians (35–44) have less life insurance than the level the research shows the community believes to be necessary (the community standard).
  • Most ordinary Australians cannot afford to pay an upfront fee for financial advice and, if trends continue, may not be able to access a financial adviser to help them identify their life insurance needs.
  • The declining number of financial advisers are increasingly focusing on fewer, higher value customers. On the current trajectory, within three years, only the wealthiest 15 percent of Australians will be able to access life insurance with personal advice.
  • Underinsured people risk leaving their dependents facing severe financial hardship, if they prematurely die or become unable to work.

The statement says the research was commissioned by CALI to better understand community expectations about life cover, trends in the Australian market, overseas experience, and the impacts of recent regulatory changes.

It says the members of CALI are calling on the Australian Government and industry regulators to take the research findings into account when considering future policy decisions, to ensure the right life insurance and access to affordable financial advice is available to all Australians, now and in the future.

Rodney Cook…we must ensure that access to  quality and affordable financial advice and advised life insurance  remains within the reach of the many, rather than just the few…

Commenting on the report MLC Life’s newly appointed CEO, Rodney Cook, says that consumer interests have to come first. “Access to quality and affordable financial advice and advised life insurance is a great benefit to Australians, and we as a community must ensure that access to it remains within the reach of the many, rather than just the few.”

Meanwhile Philip Kewin, CEO, Association of Financial Advisers says that in such uncertain times, people need to ensure they have the right protection for themselves, their families and their businesses. “Access to affordable professional advice is critical to ensure people have the right cover at the right time. The CALI campaign is about ensuring affordable advice for all Australians – it’s just the right thing to do.”

And Damien Mu, CEO, AIA Australia & New Zealand says: “The research shows how important it is for decision-makers to consider the impact of life insurance regulatory change on everyday Australians; not just in terms of current policy settings, but also any potential changes in the future. We need to ensure Australians have access to quality advice and choice to meet their protection needs.”

Click here to download the Challenges confronting the Australian life insurance market whitepaper and the independent NMG report Australian Life Insurance Market Research Report.


  1. I have been saying on Riskinfo for the past few years that the retail life companies and our associations need to go the govt collectively and make them understand that LIF in its current format must be altered with commissions needing to be reinstated and the abolishing of this evil 2 year clawback, and something needs to be done about the FASEA imposition that ALL advisers must complete a degree to continue operating. Thankfully, it seems this is finally happening with the insurance companies, the AFA and FPA supporting this campaign group. You will run into opposition from groups such as the industry super funds and Choice magazine, but please don’t give up, for the sake of the retail life industry in this country. Finally, whatever you do, please do so before ASIC begin their review in 2021. We already know their audit conducted in October 2014 was flawed, and the advice industry will not cope with another.

    • Concerned I do agree with the point about commission payments for Risk Advice, have some questions about the 2 year clawback provision as this can encourage churning cover from one provider to the next (which was occurring hence LIF being instigated to begin with).
      But I must disagree with you around the requirements for Risk Advisers needing to complete a degree level qualification to practice. Yes that is your speciality and you are can have at it as far as I am concerned. But you should also have some broad knowledge about super (if you are recommending cover with in super) and retirement issues.
      I work in a business that advises on a broad range of areas including personal risk protection and that is what I love.
      But if you look at what we do in context with other professions, Solicitors specialise, but ALL Solicitors have at least a basic understanding of corporate law, even if they specialise in criminal law and vice versa. Doctors specialise, but a GP will have some basic understanding of anaesthetics. Accountants specialise, but auditors will have a basic understanding of tax.
      In advice an Retirement specialist will have basic understanding of Risk even if they do not practice in that field. I would expect that you would have a basic Retirement Issues, if only to identify that is a need that the client needs to address to refer on.

      • The trouble with your statement Ron as factual as it sounds is that we are not being asked to get a brief overall knowledge of other possible products that may surround or become incorporated in what we do. In fact i think most of the industry actually does ALREADY have that knowledge. Most of us realized that some ago and did the necessary learning to bring us up to speed with basic knowledge. That will always be required we do before anything ourselves { if licensed} or passing it onto the Financial Planner for the retirement planning or pension issues or areas that we cannot or will not be involved in. THEY { meaning there being more than one contributing organisation to this outrageous legislation} are asking for 4 years University study at $10,000 plus to become a fully compliant Financial Planner This is not where many want to be, particularly if you have been in the business for 20 years plus and established a well known and profitable business looking after clients with Life Insurance needs and thinking of retirement around 2026-27.
        It just brings that retirement that much closer and more experience lost from the industry.
        They need to understand there is not one size fits all. PS the churning issue { you mentioned } after being “touted” as a huge blight on the industry was actually addressed a year later { after reports and legislation were pushed through based on it } as incorrect and that the so called “churning” issue was far far less a problem then originally indicated.
        Non the less we all have our opinions that’s what this chat page is all about. Seeking the actual truth and way forward is the whole point. Sooner rather than later i hope.
        By then though it was to late they had what they wanted.

      • Ron – Ken’s comments below summarise how I feel exactly. I probably should have been clearer in my initial comments. I have been an adviser for over 20 years and my experience, past and ongoing training have contributed to an solid understanding of all I need as a risk specialist, which includes an overall knowledge of advice. The fact is that most of my experience, past training and qualifications are not being recognised and thus I am now required to undergo a degree – sorry, I don’t accept that. But as Ken said, we are all entitled to our opinions. Cheers

  2. This article is correct and is something that advisers have been telling the Industry and Government for years what would occur if the Life Insurance Framework and FASEA was passed.

    The response was to ignore the very people who work at the coal face and to push on with an unworkable maze and restrictions of trade that have driven the Industry towards the cliff.

    There are already too few specialist risk writers to stem the rising claims and cancellations, with many Financial Planners who previously wrote some Life Insurance for their clients, now walking away, as they also realise that the cost, time, effort and risk to their Business, does not warrant being involved.

    The solution is simple and could be changed quickly.

    I sent a 6 point plan to APRA, who pointed out that ASIC would make the necessary changes.

    The Prime Ministers office has also been sent a copy.(Understandably, the Prime Minister has been a bit distracted with the Corona virus Pandemic)

    Current estimates point to less than 3 thousand risk writers left to look after nearly 2 million Businesses and another minimum 13 million Australians who need Life and Disability advice and Insurance.

    This equates to 5000 clients per adviser which is an impossible number.

    30,000 risk advisers would solve the disaster facing Australia today and would stabilise the insane premium increases that are exacerbating the cancellations, plus build a buffer to the claims.

    The 6 point solution would cost NIL $ to the Government and bring some sanity back into the Industry, as unfortunately what we have today, is a path to self destruction.

    What the Life Insurance Industry is going through, is endemic across all Australian Business, where illogical Public Servants and self serving vested interest Lobbyists, tell Government Ministers of their vision, which most of the time is theory dressed up as fact.

    The Government spends Billions of dollars in studies and investigations, talking to everyone, then ignoring the practitioners who know the issues and have the answers.

    We then have the media frenzy, where the truth is blurred and pushed to the outside edges, while the “expert” consultants ( AKA as vultures and leeches ) charge outrageous fees to feather their own nests, while feeding misinformation to the media and the Government.

    We then end up with more Investigations, Royal Commissions and the merry go round continues with more complexity, costs and unworkable conditions.

    Australia is being driven into a position where small and medium Businesses are being sent to the wall and even though most Australians are employed by this sector, the Institutionalised Public Servants who are not impacted themselves by their actions, continue with their reprehensible actions.

    • Your points are valuable, Jeremy. However, for them to hit the target these should be coming from the AFA, FPA or other industry associations which might carry some weight and otherwise empower us as a group. Underinsurance will be exacerbated now times 10.

  3. This is both head-shaking and eye-rolling stuff! As if LIF and now FASEA wasn’t enough, we have the through-the-roof compliance issues in terms of paperwork.

    For example, if a low-income earner wants to buy a $500,000 life and TPD policy to protect his family, how many of us can afford to do that for him? We might earn about $600, true. However, out of that comes dealer group fees on top of about six hours of paperwork with SOAs, Best
    Interest Duty and FNAs etc. Unless we’re altruistic in the extreme or love working for about $35 an hour, what hope is there for such people?

    Really, the powers-that-be are dismantling an industry which has worked perfectly well for more than 150 years. And for what?

  4. I guess their plan is coming to fruition, destroy the IFA’s and the consumer be damned! Follow the money, industry funds flogging sub-standard policies at inflated premiums, pubic serpents building their power whilst achieving positive outcomes for THEMSELVES, “consumer” groups flogging subscriptions on half truths and not a single consumer benefit.

  5. Despite so much persistent and tireless work and consultation during the LIF process in regard to the predicted negative result of implementation, no-one listened to the experienced advisers, the expert contributors, the experienced groups who had consumer’s and the industry’s best interest as a priority because the process was driven by ideology and not reality.
    Kenneth Hayne’s commentary regarding Life Insurance commissions ideally being reduced to zero are negligent and dangerous.
    This is yet another clear example of an individual using their power and profile to influence legislative change based on ideology.
    The outcome of LIF and the incredible cost of compliance and regulatory impost is killing the Life Insurance industry. It is literally in a palliative care state right now.
    Unless something is done to reverse the over reach that has been applied to the process of providing quality Life Insurance advice and something done to ensure the adviser can be fairly remunerated for the provision of advice and remain profitable the vast majority of Australians who require assistance, guidance and education in order to make informed decisions about financial risk will be left on their own.
    All of this could have been prevented if the feeding frenzy against the Life Insurance industry was not started by ASIC and continued with the likes of John Trowbridge and others determined to justify their existence.
    The funeral march hasn’t started yet, but the preparation is getting very close.

  6. The root of the troubles is the stuff ASIC uncovered in its life insurance report. The churning issue was heavily overstated but when I looked at the ‘legal’ examples (as opposed to the illegal examples that were also provided) I felt sick to my stomach – selling policies that took a person’s entire super contributions for example.

    Hence there was justified outrage, together with 140% up front (if you wrote all your risk through one company) it created a fairly toxic sales environment.

    The FSC then used this loss of reputation to reduce risk writers income with the LIF changes. Those reductions in income were much smaller than they looked (140% to 60% – wow I just lost 80% of my income!!! – if you have the stomach to write level policies your income was just pushed into the future but not actually reduced) but they strongly reduced the incentive to write risk, much more than they realised.

    So, life insurance companies have been writing large IP losses for years. First they tried to take it from us, then they used the law to make insurance more unattractive. They stood by while our compliance burden went through the roof and didn’t help.

    If we manage to reduce compliance without allowing those 100% super contribution premium policies then we might just have a sustainable future – insurance companies AND advisers, and clients will get the cover they need.

  7. Sold my risk business of 33 years & retired on 01/07/2020. NOT of my choice, but due to the ridiculous draconian level of compliance placed on us ‘100% risk writers’. Saying this, I have NO sympathy whatsoever for those who wrote all their risk buisness on 130%+ upfront commission. I changed to 80/20 [now 66/22] in 1993. I built a substantial recurring income base that has allowed me to exit the industry in overall good financial shape. Something the old upfront commissions would NEVER have enabled me to do. I was a professional ‘businessman’ not a product peddler! My reasons for exiting were 3 fold. 1. Bundling risk only advice into FP compliance structures made it a total grind to work your way through setting up the simplest new risk insurance policy. Thus making the 66/22 [akin to the 80/20 commission I comfortably worked with until 2018] impossible to cover my actual costs. 2. The FASEA education requirements, again lumping us all into one big basket [case!], with over 80% of the education being totally irrelevant to my ongoing risk insurance advice needs. 3. My AFSL going overboard on compliance, effectively doubling what ASIC actually required, then levying additional fees [thousands of dollars] as it was struggling to cover its costs! It’s not just 15% of the wealthiest clients personal risk insurance advice will be confined to – only the wealthiest risk insurance advisers, with substantial existing recurring income, will be able to stay in business. I regret being forced into a premature exit – but at least I can say I found a very professional holistic AFSL who acquired my client book. For that I am thankful.

  8. Zurich Australia chief executive of life and investments, Justin Delaney, added that the campaign was an “exciting” opportunity to “reset how we as an industry meet the expectations of consumers and the community in a modern context”. FSC insurance company cartel speak for looking at other ways to distribute insurance and shaft advisers.

    Before advisers get excited about a return to higher commission or reduced claw-back arrangements I suggest you read the 13 page CALI report and the 65 page NMG consulting report which can be found on the Risk Info website. No good news there just the usual FSC posturing and dictating the argument for “new channels of distribution”? see page 12 of the CALI report.

    On page 63 of the NMG report it shows Aust initial commission is 60% and our lapse rate is 15%. However in NZ the initial commission is 190% and the lapse rate is 12.5% while in the UK the initial commission is a whopping 200% plus with a lapse rate of 8%. It doesn’t appear that higher rates of commission automatically lead to re-writing and higher lapse rates elsewhere, maybe it is just the incompetent management running the Australian businesses that have no clue?

    Maybe we should all move to NZ? 3 x upfront commission and about a third of the compliance from what I hear.

    • “Justin Delaney, added that the campaign was an “exciting” opportunity to “reset how we as an industry meet the expectations of consumers and the community in a modern context” I actually read this with dread. To me it was more FSC-speak for “we haven’t finished trashing your client relationships – watch this space”.

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