Rise in super balances to hinder life policies

The predicted rise in voluntary savings and superannuation in Australian households will come at the expense of life insurance policies, according to IBISWorld chairman Phil Ruthven.

Ruthven said that if investors thought their superannuation balances were sufficient to fund them through retirement, they would be less inclined to take out life insurance policies to bolster that.

“People will put more money into savings [and will not] continue to get more life insurance as such,” Ruthven said.

His comments followed the release of the latest IBISWorld report, which examined the average household’s expenditure and how much Australians were spending on particular services over the years.

The report found that almost 9 per cent of the total household income went towards financial and insurance services, which included investment advice and tax planning.

This figure had been growing at a steady pace from 2 per cent in the 1950s, but Ruthven said he did not believe further significant growth would occur in this field.

“Most of the growth has come through already, particularly over the last 20 years,” he said. “It may edge up a little bit further, but I don’t see it going beyond 10 per cent of household incomes any time in the foreseeable future.”

However, savings, which currently hold a significantly smaller percentage of total household income than in the 1950s, were predicted to grow significantly, according to IBISWorld. Ruthven said investor complacency about their financial situation could hinder the life insurance market.