A call from Acenda’s Marshall Ross at Riskinfocus 26 to reposition life insurance as a core pillar of the economy attracted strong reader interest this week…
Advisers should reposition life insurance as a core component of Australia’s economic framework rather than a product defined by claims, as demographic and fiscal pressures intensify, according to Acenda’s Education Manager Marshall Ross.
Addressing a capacity audience at the recent Riskinfocus 26 event in Melbourne, Ross said the industry risks underselling its value by focusing too heavily on individual claim outcomes instead of the broader economic role life insurance plays overall.
“We normally talk about value in the context of a claim,” he told attendees. “That’s important, but it’s not particularly insightful on its own.”
Instead, he suggested advisers frame life insurance within a wider system that supports government budgets, taxpayers, and long-term social policy.
Australia faces a convergence of structural trends …that together will put pressure on the country’s social safety net
He warned that Australia faces a convergence of structural trends, an ageing population, worsening health outcomes and declining workforce participation, that together will put pressure on the country’s social safety net.
Ross said the proportion of Australians aged over 65 is rising rapidly, while the share of working-age taxpayers is shrinking. Citing research from the Grattan Institute, he said retirees are projected to double from around one in 10 Australians today to one in five by 2060.
“That has a direct impact on how we fund everything,” he said, noting income tax remains the dominant source of government revenue.
Longer, less healthy
He said that while people are living longer, rates of chronic disease and disability are rising.
…We’re carrying more risk, for longer, with less buffer…
“We’re carrying more risk, for longer, with less buffer,” he said.
Ross estimated the total annual economic cost of disability and related factors at more than $140bn when direct costs, lost productivity, and broader flow-on effects are combined.
He argued life insurance delivers a dual benefit that is often overlooked. Beyond funding individual claims, it reduces system-wide costs by supporting earlier treatment, improving recovery outcomes, and enabling people to return to work sooner.
Data and graphic / Acenda …demonstrating the economic impact life insurance will have if cover levels return to those previously held and the impact an uplift would deliver
He estimated life insurance offsets around $660 per taxpayer in direct costs each year and a further $1,300 through reduced or avoided impacts.
Despite this, he said life insurance remains a relatively low priority for many consumers, ranking behind motor, health, and home insurance.
Ross attributed the gap in part to behavioural biases, with individuals more likely to focus on highly visible but less probable risks while underestimating the likelihood of illness or disability.
Self-insurance
He also challenged the notion of self-insurance, arguing that in Australia the cost of underinsurance is often borne by the public system.
When people choose not to insure, the risk doesn’t disappear, it shifts
“When people choose not to insure, the risk doesn’t disappear, it shifts,” he said.
Coverage levels for income protection and TPD insurance have declined in recent years, increasing pressure on government-funded support.
Acenda’s well-known Education Manager, Marshall Ross, speaking to a packed Melbourne audience at Riskinfocus 26 …the industry risks underselling its value by focusing too heavily on individual claim outcomes
At the same time, a significant share of household wealth is held in tax-advantaged assets such as the family home and superannuation in pension phase, limiting the scope to lift revenue.
Policy change
Ross said these dynamics make some form of policy response likely. He pointed to past interventions, including incentives to boost private health insurance uptake and the introduction of compulsory motor vehicle insurance, as examples of how governments have reshaped markets to manage risk.
Data and graphic / Acenda …this graphic demonstrating the significant impact government policy change can deliver – in this case increasing the private health insurance rate by 15% in only three years
“If you incentivise behaviour, you can change outcomes,” he said.
Ross said advice plays a critical role in improving outcomes by addressing underinsurance, structuring cover effectively and guiding client behaviour over time.
…structured risk advice can materially improve long-term financial outcomes, even without a claim event
Modelling presented at the conference suggested structured risk advice can materially improve long-term financial outcomes, even without a claim event, through better decision-making, tax efficiency, and ongoing policy management.
“People make better financial decisions when they’re protected,” he said, adding that advisers should shift client conversations towards the broader financial consequences of illness, disability, and loss of income.
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