Chronic underinsurance puts Australians at risk
Australians are carrying a risk of uninsurance of more than 75 per cent, with women at greatest risk of not being able to meet financial obligations in the case of death or disability, according to a new AXA/Dexx&r report.
The report is a continuation of a pilot report undertaken in 2003, and looks at the gap between the level of insurance required to cover personal debt and replace income for a 10-year period (considered a conservative measure), and the level of insurance currently held.
According to the report, existing death cover for each employed person is estimated to be $148,136 — only 29 per cent of the required level of $512,378. For income protection, the picture is worse, with cover in this area estimated at $8,697 — just 23 per cent of the estimated $29,006 required.
AXA general manager financial protection Tassin Barnard says the results indicate clients are at risk and advisers are missing out on opportunities.
“The number that really hit me between the eyes is that there is $3.5 billion in income protection and $4.5 billion in life insurance that is not being written,” Barnard says.
For women, the income protection situation is even worse, with the report finding that the level of cover required was just 14 per cent of that required for employed females.
Barnard says this places them at greatest risk, however, most are unlikely to even see a financial planner unless they are independently wealthy.
“Advisers are only tapping into the insurance market when it is on the back end of investment, but there is huge opportunity with people who are not even in the investment market,” she says.
AXA commissioned the report because it believed there was little public awareness of the level of underinsurance and the risks inherent in this problem.
Recommended for you
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.
