Life insurance is viewed as a secondary measure of financial security, behind saving and investing, despite around a third of adult Australians being covered by some form of insurance, according to research from Investment Trends.
The ‘2024 Consumer Insurance Needs Report’ found that out of 20 million adult Australians, 6.7 million are covered by some form of life insurance.
On a scale from zero to 10 (with 10 being most important to financial security), those who had a partner and children considered life insurance (6.5) to be less important than investing (7.1) or saving (8.0). Those figures were little different for those who were partnered with no kids, single and living with a parent, or single and living alone – all prioritised life insurance behind savings and investments.
Investment Trends head of research Irene Guiamatsia says that before commencing this research she had a good appreciation of the immensity of the insurance gap, but wanted to dig further.
“People don’t proactively go out there and seek insurance,” Guiamatsia tells Professional Planner.
“The original question for us was ‘why?’. Certainly, if you look at financial security and you want to build up wealth, you also need to protect yourself and your family from financial risk.”
Guiamatsia says people don’t naturally think about protection in the same way they think about savings or investments, which people can see grow over time.
“But for protection, whether it’s protecting your assets or protecting your health, that lack of tangibility consumers have creates a bit of distance in their own appreciation for how that contributes to their financial security,” she says.
“We have identified that as an area that insurers need to proactively work at demonstrating to consumers.”
Whether this oversight is due to consumers’ negative connotations towards insurance, in that it is seen as a lifeline in a worst-case scenario rather than as a wealth creator, Guiamatsia says the answer is nuanced.
“Perhaps yes in the case of life insurance but not so much in the case home and contents insurance,” Guiamatsia says.
“We’ve seen that Australian consumers proactively want to talk about home insurance in the wake of the past few years with floods and natural disasters.”
Leaving a mark
While the regulators and government have sought to keep pressure on insurers over rising premium costs – APRA and ASIC released a joint letter in December about how they will continue to monitor the pricing decisions – the research found consumers will value brand recognition (39 per cent) over recommendations from an adviser (29 per cent), and premiums (23 per cent).
That may very well justify spending on large-scale branding projects, like sports teams or stadiums – for example, Zurich sponsors Melbourne Demons, Allianz sponsors the eponymous stadium in Sydney (among others around the world), while TAL is a corporate partner of the Sydney Swans.
Overseas, Metlife has naming rights of the American Football stadium home to the New York Giants and New York Jets, while AIA is the shirt sponsor of English Premier League club Tottenham Hotspur.
Guiamatsia says the report suggested such investments in branding are well thought out.
“The fact that brand is such a dominant factor in driving selection shouldn’t come as a big surprise,” Guiamatsia says.
“If the whole premise is that we’re looking for protection…you want a secure one. That’s one aspect that’s quite dominant, irrespective of the type of insurance you’re talking about.”
For consumers who are not choosing an insurance provider for the first time and are open to engaging with another insurer, branding is relegated to a lower preference.
In this circumstance, lower premiums were the highest factor (58 per cent), followed by better rewards and benefits (29 per cent), and branding (27 per cent).
“There, they’re looking for a few things – lower premiums but not just that they expect lower premiums but they’re also looking for better digital engagement which I thought was interesting from an insurance point of view, and also recognition of loyalty,” Guiamatsia says.
“Those additional themes could maybe help new entrants develop a differentiated proposition. The reality with brand is that they it can take a lot of time to build brand equity.”
When it came to client satisfaction and digital engagement, Zurich led with the highest client net promotor score.
Over the 37 years I have advised and spoken to thousands of people about Life Insurance, I can count on one hand the number of people who rejected Life Insurance as a positive benefit if they died or became disabled.
The struggle is not getting people to recognise Life and Disability Insurance as important, it is to get them to actually do something about attaining it.
No-one likes to think too deeply about their own mortality and it is an easier process to put that thought process into the “later”category, which usually means “much” later.
If people find something confusing, confronting or complex, with the thought it could be expensive for little reward, then it is human nature to walk away.
Life and Disability Insurance will always be a secondary thought process and unless there is a trigger point such as an Adviser to guide them, then there will continue to be a shortfall in people having appropriate cover to protect their assets and future income needs.
People will listen, the issue Australia has, are the road blocks that have driven thousands of experienced Advisers out of the Life Insurance Industry and the impenetrable maze for new people who may want to become a risk Adviser, yet all they see are massive costs and years of studies in mostly irrelevant fields that have NIL relevance to the work they would perform.
Everyone wants Financial security and that can come from being guided by an experienced Adviser who can teach them that what they want to build, must be supported by proper foundations, which is what Wealth Protection does for them.
The issue now is that with all the Government changes and “improvements,” we have lost thousands of experienced Advisers and virtually NIL new risk specialists are bothering to enter or complete the maze of complexity, which has led to our current dilemma of most Australians having insufficient Insurance to meet their needs.