Chronic underinsurance problem - report
Australians are underinsured to the staggering tune of almost $500,000, a new report has found.
The study, compiled by insurance researchers Dexx&r and commissioned by AXA, shows that only 22 per cent of Australians have any life insurance cover at all.
But those who are covered are insured on average for only $201,976 — a massive 70 per cent, or $468,645, less than the $670,621 required.
The problem appears just as chronic in income protection insurance. According to the Dexx&r figures, the 6 per cent of Australians who have income protection cover are on average insuring only 24 per cent of their total insurable income.
A separate study of consumer attitudes to insurance conducted by AXA in light of the Dexx&r findings has pointed to a general lack of confidence in insurance and financial advice as one of the key issues.
A widespread misunderstanding of insurance products, and an attitude by many Australians that they were “bullet proof”, were also impeding attempts to improve the rate of insurance coverage.
The extent of the problem has led to calls for a far reaching re-think by the insurance industry.
AXA general manager of sales Adrian Emery said the financial services giant was planning adjustments to its insurance products as a result of the research to overcome some of the attitudinal problems of consumers.
“If people don’t do something about the issue, we could be in for a big shock if we get a financial crisis coming, either to individual people or across the economy,” he said.
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Policy and advocacy specialist Benjamin Marshan has left the Council of Australian Life Insurers after less than a year, having joined in March from the Financial Planning Association of Australia.
The declining volume of risk advisers meant KPMG has found a rising lapse rate for insurance policies arranged by independent financial advisers, particularly in the TPD and death cover space.
The Life Insurance Code of Practice has transferred from the Financial Services Council to the Council of Australian Life Insurers.
The firm has announced it will no longer be writing new life insurance policies in the retail advised and corporate group insurance channels, citing a declining market and risk adviser numbers.
