Australia's life insurance gap expands as risk aversion increases - Swiss Re
The life insurance gap in Australia expanded from $540 billion to $927 billion between 2000 and 2010 – the fifth largest increase in the world, according to Swiss Re’s ‘Mortality Protection Gap: Asia-Pacific 2011’.
In a separate report – entitled ‘Risk Appetite and Insurance Asia-Pacific 2011’ – Swiss Re conducted a survey of 13,800 consumers aged between 20 and 40 across eleven major Asia-Pacific markets. 41 per cent of respondents said their families would or might struggle financially in the case of early death, major serious illness or disability – with the key reasons being inadequate savings/investments (87 per cent) and insufficient insurance (58 per cent).
The study found that Australians in this age group have become more risk averse, and 56 per cent of respondents plan to buy life insurance over the next 12 months.
Despite the perception that life insurance is expensive, Swiss Re head of life and health client markets Neil Sprackling said in more than 50 per cent of cases the underlying cost of cover was less than what consumers expected to pay.
“This perception gap in customers’ minds is an opportunity for the life insurance sector to reach out and provide greater clarity to consumers on the relative cost and value of pure life insurance,” Sprackling said.
“The consumers are saying that, in most cases, they are willing to spend more than it actually costs to buy insurance.”
As a nation, the study showed that Australia dropped from a ranking of one to three behind Japan and Hong Kong in the ‘Asia-Pacific Consumer Appetite for Risk Index’ (CAFRI) – which is based on consumer attitudes towards health, finance, career and lifestyle.
With the gap narrowing marginally since 2007, Sprackling said the last three years has seen the insurance industry move in raising the profile of insurance so people are more aware and engaged.
He said superannuation funds in particular have been actively increasing the levels of insurance cover delivered to their members.
“As a result, if the insurance level goes up, you’ll see the mortality protection gap continue to decrease.”
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