Australia has a lower level of life insurance than several comparable OECD economies despite having insurance in a compulsory superannuation system according to a report from ASFA and Deloitte.
The report found that, using a measure of life insurance premium volume to GDP, Australia (1.5 per cent) sits behind the OECD average as well as the US, UK, and Canada.
New Zealand, which has no group insurance in superannuation, is one of the OECD’s most underinsured nations (0.9 per cent of GDP) based on this metric.
The Future of Insurance in Superannuation report recommended an improved focus on wellness and return to work that could assist almost 83,000 members which could boost GDP by around $1.9 billion by 2062, as well as giving those members better lifetime earnings.
Additionally, early intervention and broader access to treatment could potentially reduce social welfare and unemployment costs by $224 million a year by 2062.
Deloitte Access Economics partner John O’Mahony said the insurance industry covered almost 10 million people.
“In 2021, 50,000 people and their families benefited from more than $6 billion in payouts,” he said in a media release on the report.
Low level of opt-ins
The report stated the default insurance approach improves the likelihood of individuals being insufficiently covered if they suffer illness or injury.
“If it was offered on an opt-in basis, insurance in superannuation would shrink considerably – opt-in rates (where it currently operates) are just 18 per cent – in part because of the many traditional reasons for underinsurance (with individuals not understanding, calculating or properly valuing future financial circumstances).”
With awareness levels being low, it noted the impact stapling has over insurance in super. This issue had been raised by opponents of stapling, including the new financial services minister Stephen Jones who noted workers could be lumped in with ill-fitting insurance arrangements if they changed professions.
“Blue collar workers particularly benefit from default arrangements: by the nature of their manual and often hazardous work environments, they face higher risks, but evidence from where opt-in currently operates suggests their participation is lower – only 8 per cent of blue-collar workers would opt-in to insurance through superannuation,” the report stated.
ASFA CEO Martin Fahy said giving trustees and insurers access to better data will help them improve their offering to their specific membership base.
