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.
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.