The insurance conundrum

During Covid, a time when more people than ever are looking to protect their livelihoods, sweeping regulatory changes to the insurance industry have caused a ripple-effect impacting every player, from the insurers through to Superannuation companies, Advisers and clients.

Why should I have insurance?

Our current and future earnings are worth considerably more to us than any of our other assets, so protecting them is essential. 75% of Australian households don’t have enough savings to cover unexpected events and the uninsured need to rely on government subsidies like NDIS which are limited.

Without insurance, our family might need to sell their home or other possessions to cover the costs of illness or continue on after our death and financial disaster can have a flow-on effect to later generations of the person originally impacted.

Many Australians don’t have or haven’t considered any form of life insurance, often because the cover options are confusing, or they feel they can’t spare the funds from their day-today-budget to cover the premiums.

I do have some insurance..

Those with insurance, often don’t have enough cover. Figures released by Deloitte five years go show that only 61% of basic day-to-day living expenses are covered by the median level of life insurance for those who have it. This gap has continued to increase.

So I’ll rely on the insurance in my Super..

70% of Australians have cover via their superfund and this is their only safety net. While this cover can appear more cost effective, many members are paying way too much for cover which is often inadequate with strict terms and conditions which limit the likelihood and amount of pay-out.

So I’ll get advice..

Recent research shows that 25% of people with existing policies want to increase it and 80% feel more confident about their cover if they have an Advisor.

An industry in strife..

Cost and a lack of understanding of the benefits and variety of covers available aren’t the only issues effecting the industry. Fewer insurance companies and fewer Advisers, have made the industry less accessible in uncertain times when cover is needed most.

Between 2012 and 2016 insurance premiums reduced, and insurers’ bottom lines plummeted, so regulatory changes were implemented to save the insurance industry. These changes have resulted in fewer insurance companies and premiums increasing dramatically and often.

Covid means more people are wanting to seek financial advice but changes to remuneration methods, education requirements, compliance and product availability have caused Adviser numbers to decrease and fewer new Advisers to enter the market.

In summary, government and expert reports show that the current life insurance market is in a bad state and only getting worse, which further highlights the importance of getting advice while it’s still possible.

If you’d like to review your insurance position, click here for an obligation-free call with one of our specialists.