Women are the underdogs when it comes to insurance

Research released by the Investment and Financial Services Association in late September highlighted the fact that Australian women with dependent children had significantly less life insurance than their male counterparts.

The IFSA-sponsored research found that 50 per cent of female parents hold life insurance, compared to 62 per cent of male parents, but their cover is “most likely to be through their superannuation fund and is therefore unlikely to be adequate in meeting their family’s needs, unless extra units of insurance cover are purchased”.

The research represented part of IFSA’s push to address what is perceived to be a chronic under-insurance problem in Australia, but recent data compiled by trans-Tasman financial services house Tower suggests the problem where it related to women goes much deeper.

The bottom line of that research is that, generally speaking, the insurance industry adopts a very different approach when it comes to insuring women, and one that tends to explain the findings of the recent IFSA exercise.

In circumstances where the attitude of insurance companies is largely determined by their claims experience, the Tower data makes disturbing reading for those hoping to inject equality into the life insurance equation.

According to Tower, the most recent Australian study into disability income claims drivers was the Report of the Disability Committee, conducted by The Institute of Actuaries of Australia in 1997, a study that analysed the combined incidence rates and average claims duration of 17 life insurance companies during 1992 and 1995.

That report confirmed that Australian women had a significantly worse experience than men, with the overall incidence rates for females being 138 per cent of that for men. In other words, women represented a higher risk for insurers than their male counterparts.

The Tower analysis of the 1997 study said that when analysed over different occupations and waiting period categories, female incidence rates were almost always worse than the corresponding male category.

The study also found longer average claims durations for females.

“In aggregate, the average claim duration for women was 131 days compared to 110 days for men,” it said. “The data analysed cause of claim and occupation, and the results demonstrated an experience for females which was almost always worse than males.”

The problem confronting insurers and, indeed, women is that more recent exercises undertaken by the same committee suggest that there has been little improvement over recent years.

Noting these findings, Tower’s analysis said that Australian insurance companies also referred to their own claims experience and other factors before determining appropriate disability premium rates.

“We can confidently conclude that the higher premium rates calculated for female income protection policies are based on actual facts regarding the higher costs of insuring females,” it said.

In launching the outcome of its research late last month, IFSA noted that women often cited the high cost of obtaining appropriate insurance as a major hurdle to getting coverage, but pointed out that women with dependent children could get coverage for as little as a dollar a day.

Referring to the research, IFSA chief executive officer Richard Gilbert said: “Women commonly cited the expense of life insurance as the primary reason for not having risk protection cover, with 48 per cent of full-time working mothers stating that expense was a major barrier to coverage”.

“Clearly, our industry has got to do a better job of dispelling the widely held belief that life insurance, particularly among women, is too expensive. Term life cover for up to $700,000 can be bought for around $1 per day,” he said.

Gilbert said only 20 per cent of full-time working women with dependent children had enough insurance to cover their income for three years or more, yet the commonly accepted benchmark was 10 times their annual salary.

“A recent House of Representatives Committee Inquiry into Balancing Work and Family heard that the hourly rate for nannies looking after children and assisting in the running of a household ranged between $18 to $26 per hour,” he said. “Based on these hourly rates, for 50 to 60 hours a week, a family losing a mother may find that the cost of home help and child care for very young children is in excess of $75,000 per year — not that you can ever really put a price on a mum, or a stay-at-home dad for that matter.”

“Fifty per cent of female parents hold life insurance as compared to 62 per cent of male parents, but cover is most likely to be through their superannuation fund and is therefore unlikely to be adequate in meeting their family’s needs, unless extra units of insurance cover are purchased,” Gilbert said. “I think that when you look at what it can cost to raise children and run a household in the absence of a mother, a dollar a day to insure a woman with dependent children is really very affordable.”