Australia’s life insurance industry is confronting what has been described as a “perfect storm” of pressures, as fewer younger Australians take out cover and older clients continue to withdraw from existing policies.
In an opinion piece published this week, Bombora Advice Managing Director, Niall McConville, says the trend poses a long-term threat to the sector’s sustainability, pointing to a combination of social, economic and regulatory factors that have reduced engagement with life insurance (see: The Age of Underinsurance…).
“Older clients are opting out, and younger Australians aren’t replacing them,” McConville said. “Rising premiums and cost-of-living pressures are making cover less accessible for the demographic the industry most needs to engage.”
Citing figures from the Financial Services Council, McConville said around one million Australians are underinsured for death or total and permanent disability cover, while a further 3.4 million are underinsured for income protection. He added that people aged under 35 make up the largest proportion of both groups.
He also referred to data from the Council of Australian Life Insurers, which found that 68% of Australians are concerned about their ability to afford or maintain life insurance amid cost-of-living increases.
…traditional life insurance touchpoints have also diminished
McConville said traditional life insurance touchpoints have also diminished, noting that banks no longer routinely offer life cover alongside mortgages — a change that has further reduced younger consumers’ engagement with the product.
He believes that technology and artificial intelligence could help simplify the process of purchasing life insurance for younger consumers. “At the moment, a 25-year-old completes the same application process as a 55-year-old. AI tools could make the experience faster and easier to understand,” he said.
However, McConville noted that structural issues remain within the industry. The 60% commission cap continues to limit advisers’ ability to service lower-cost policies, even though early engagement could provide the greatest long-term benefit to consumers.
With only about 600 specialist risk advisers nationwide, McConville said greater collaboration across the sector is required to address the problem. Bombora Advice, he said, is working with insurers and reinsurers to explore new advice pathways and more accessible options for consumers.
“The answer won’t come overnight,” he said. “But through technology, adviser expertise and coordinated reform, we can begin closing the protection gap before it widens further.”
