Reviving Australia's Troubled Insurance Industry: Opportunities and Challenges
Reviving Australia's Troubled Insurance Industry: Opportunities and Challenges
0
Australia's retail life insurance sector is facing significant challenges despite generating approximately $9.4 billion in annual premiums.
Upon closer examination, it's evident that this industry is under strain.
Growth is primarily driven by price increases rather than the addition of new clients, signalling concerns for long-term sustainability.
New business growth hovers around 8-9% annually, not enough to adequately bolster the sector.
This situation is troublesome, especially given Australia's notable issues with underinsurance, highlighted by figures from NMG Consulting showing over 20% of Australians aged over 35 are underinsured.
The insurance industry is grappling with dwindling adviser numbers, rising claims, and the burden of maintaining sustainable products like individual disability income insurance (IDII) and total and permanent disability (TPD) cover. However, there are positive signs and opportunities for improvement, notes Kieran Forde from Zurich Australia. Although new business volumes for this year are projected to hit $340 million, the industry needs further growth to secure its future. Recognising the increased need for life insurance in an environment of rising incomes and living costs presents opportunities for advisers who do not traditionally provide risk advice.
Currently, one-third of Australia's approximately 15,550 registered financial advisers offer risk advice, with a small fraction of these generating substantial new business. Forde notes that regulatory stability has allowed advisers to refocus and enhance their efficiency. He is optimistic about proposed reforms, such as the government’s Delivering Better Financial Outcomes (DBFO) initiative, potentially creating a new category of advisers to provide affordable, targeted advice. This initiative could encourage life insurers and advice licensees to hire such advisers, addressing the advice gap by offering scoped recommendations on life insurance products.
Despite current operational challenges, Katherine Hayes from Hayes and Co Insurance Services views the market as favourable for risk specialists. While the industry faces systemic issues, such as regulatory pressures leading to adviser attrition, the potential introduction of a new class of advisers could rejuvenate the industry. This proposal could channel fresh talent into the sector, with some aspiring to become full-service advisers. Hayes emphasises the need for clear boundaries to delineate the roles of new advisers and existing specialists.
Key to revitalising the sector is the strategic employment and training of new advisers by life insurance companies. These professionals could complement existing advisers rather than compete, focusing on simpler, product-based advice. This approach encourages collaboration between insurers and financial advisers, ensuring Australians receive adequate life insurance coverage while creating pathways for future specialist advisers. Such partnerships could prove integral in navigating the complexity of advice and removing barriers to adequate insurance for consumers.
Starting on October 1, a comprehensive review of the voluntary Life Insurance Code of Practice will commence, with a focus on assessing the effectiveness of revisions made to its regulations and standards in 2023. The Council of Australian Life Insurers (CALI) has appointed Peter Kell to lead this independent review and deliver the final report by June 30 next year. - read more
The Australian Financial Complaints Authority (AFCA) has upheld PetSure's decision to cap their payout at $2,600 for a dog's medical costs, settling a dispute over pet insurance claims. The dog's accidental injury involved a ruptured cranial cruciate ligament, requiring approximately $6,500 in veterinary care, including surgery. Although the owners' claim was initially accepted, it was limited under the policy's annual sublimit for cruciate ligament conditions. - read more
Australia's retail life insurance sector is facing significant challenges despite generating approximately $9.4 billion in annual premiums. Upon closer examination, it's evident that this industry is under strain. Growth is primarily driven by price increases rather than the addition of new clients, signalling concerns for long-term sustainability. New business growth hovers around 8-9% annually, not enough to adequately bolster the sector. - read more
The New South Wales government has issued a stark warning regarding potential financial consequences if proposed reforms to workplace mental injury laws are delayed further. As an upper house committee gathers to discuss these changes, Treasurer Daniel Mookhey highlights the urgency, stating that setbacks will result in increased premiums. - read more
An Australian travel insurance policyholder faced disappointment as the Australian Financial Complaints Authority (AFCA) denied their claim for reimbursement of costs incurred due to changing travel plans amid threats of a pilot strike. The traveller, who rearranged his flights from Sydney to Vancouver and subsequently to Toronto, had hoped his insurer, AIG Australia, would cover the $5,576 expenses for the rebooked flights and additional accommodation. - read more
Life insurance is an essential financial protection that provides peace of mind to policyholders and their loved ones. The premiums you pay are determined by various factors, including age, health, lifestyle, and occupation. - read more
Life insurance is a financial product designed to provide a safety net for your loved ones and business in the event of your passing. At its core, life insurance aims to deliver financial protection by paying out a lump sum or ongoing payments to a designated beneficiary upon the insured's death. - read more
Life insurance is a financial product designed to provide peace of mind by offering a safety net for your loved ones in the event of your passing. The primary purpose of life insurance is to ensure that your family is financially protected, allowing them to maintain their standard of living even without your income. - read more
Life insurance is a financial product that provides a lump sum payment to your beneficiaries in the event of your death. It is designed to offer financial security by covering debts, daily living expenses, and future financial obligations. - read more
There's often confusion surrounding the amount of life insurance one truly needs. Common misconceptions cloud our judgment, leading some to undervalue their coverage, while others may overinsure, unnecessarily straining their financial resources. It is a delicate balance to strike, and understanding the nuances of life insurance is pivotal to making informed decisions. - read more
Knowledgebase
Insurance Premium: The periodic amount paid for the purchase of insurance.
