High levels of under-insurance — particularly among those aged 45-64 — is raising the cost of social security benefits and disability support pensions, with the average level of disability insurance at just over 50 per cent of the required total amount.
Research conducted by KPMG for the Financial Services Council (FSC) said that 44 per cent of the Australian population — that is, those in regular employment — need disability insurance. However, the average level of underinsurance was at 55 per cent of the total level of adequate insurance.
For those aged 45-64, the level of under-insurance rose markedly to between 74 and 83 per cent of their total level of adequate insurance.
Across the entire workforce sector covered by the research, KPMG stated that the level of under-insurance was $304 billion. This equates to 63 per cent of the adequate insurance need not being met through existing insurance.
KPMG stated that the actual level of disability insurance was $180 billion, falling far short of the required $485 billion required for adequate levels of disability insurance for Australians aged 18-64. At the same time 35 per cent of employed Australians did not have any form of disability insurance through any source.
The research data was collected from the Australian Prudential Regulatory Authority and life insurance companies covering insurance through superannuation funds, employer sponsored schemes and individual policies, with the numbers presented as an aggregate.
