A recent study by life insurer AIA Australia has revealed that two in five Australians would feel the impact of losing the primary income earner’s salary within a month of that person not working.
AIA Australia’s Life Today study, a survey of 1000 Australians about their awareness and attitudes towards life insurance inside superannuation, shows that some form of income protection is seen as one of the most valuable components of life insurance. When people were asked to rank the different types of benefits almost a third ranked income protection as the most important component, yet only 21% of Australians surveyed have income protection. The results of the study indicate that the idea of income protection is appealing to the majority of Australians.
Interestingly, the research revealed that customers see real value in having income protection. They believe that receiving an income stream or instalment payments, rather than a lump sum, is invaluable for maintaining and protecting a sustainable lifestyle when unable to work.
The cost of income protection can be a barrier to purchase for many people. Yet they are willing to pay for the inclusion of income protection within their superannuation, saying they would pay almost $60 per month to cover 75% of their income.
The research also found that people strongly favoured product concepts that helped them return to work such as retraining opportunities, practical support to engage in occupation rehabilitation and earlier notification of claims providing faster access to support.
Stephanie Phillips, AIA Australia’s Group Chief Insurance Officer says, “These results support many of the product design initiatives being undertaken by superannuation funds in response to better meeting members’ needs and ensuring ongoing sustainability of premiums.”
Ms Phillips adds, “There is an increasing shift to offering income protection, extending income protection benefit periods, better aligning benefits for temporary and permanent disablement and changing how lump sum disablement benefits are paid e.g. by instalment. In all instances, a focus is maintained on assisting the member while they regain the capacity to return to work, if possible.”
The challenge for trustees is ensuring that insurance benefits support a member’s endeavour to return to work, recognising that the cost of insurance is reducing the member’s retirement savings. “Achieving this balance is difficult but achievable,” suggests Ms Phillips.
