*This article is produced in partnership with Zurich Financial Services Australia.
Financial advisers are being reminded about the importance of understanding the personal aspects of insurance when advising clients off the back of a new report on the burden of health costs in Australia.
Zurich Financial Services has released updated analysis on the growing incidence and cost of disease in Australia.
Zurich’s Cost of Care Volume 2 white paper analyses and collates publicly available health and economic data for more than 30 major medical conditions, ranging from mental health to cancer, heart disease and motor neurone disease. It compares the prevalence, incidence and survival rates, calculating the time and out of pocket estimates for many conditions.
The report reveals the average out of pocket and lifetime costs that consumers can experience across more than 30 major medical events.
The report finds mental health conditions were the most prevalent in Australia in recent years, with over 12 million active cases between 2020 and 2022, followed by Covid-19, which has seen around 11 million reported cases over a similar period.
In addition to updated data, the report includes new analysis for conditions including Motor Neurone Disease, Covid-19 and a section dedicated to infants and children.
The latest data from the Australian Institute of Health and Welfare also reveals that $82 billion was spent on chronic conditions in FY23, which led to Dietitians Australia calling on the government to invest in nutrition care to stem the impact of diet and lifestyle-related chronic disease on the health system.
Escalating costs
Zurich Australia and New Zealand chief claims officer Matt Paterson tells Professional Planner there’s a significant financial burden associated with the treatment of certain medical conditions in Australia.
Concerningly, many of these are growing in prevalence against a backdrop of increased cost-of-living pressures and issues with access to insurance.
“As health diagnoses and treatment continue to rapidly advance, this analysis can serve as a useful single source of truth for insurance professionals, financial advisers and the broader community, assisting individuals and families to make informed decisions to improve their collective health and financial resilience,” Paterson says.
In 2023, Zurich paid more than $1.53 billion in life insurance claims, with the most claimed conditions being musculoskeletal at a total of $353 million, representing 34 per cent of all claims, cancer at $473 million (21 per cent), and mental health at $256 million (18 per cent).
Onus on advisers
Zurich risk strategy specialist Adam Crabbe says amid the ongoing cost of living crisis, the report serves as a timely reminder about the importance of life insurance, which can be overlooked by consumers when seeking financial advice.
“The report serves as a reminder of the continued importance of personal insurance in Australia, while also acting as a single source of truth not only for insurers, but for financial advisers and the broader community,” Crabbe says.
Claims remain the cornerstone of life insurance. In 2023 alone, 12,232 Zurich customers made a life insurance claim, an average of 235 claims each week.
“We constantly monitor experience and provide guidance to help advisers and customers with options on ways to help manage their premium costs.”
As an example, Zurich’s recent affordability resource helps to make insurance more affordable, showing customers and advisers how much can be saved through a range of product and lifestyle examples. In addition, the LiveWell by Zurich program offers ways for Zurich customers to access benefits and discounts, helping to further reduce the cost of day-to-day expenses.
“It’s a dilemma that we analysed and sought feedback through engagement with financial advisers and insurance professionals,” Crabbe says.
“This led to a customer-focused solution that better suits modern ways of working, today’s health landscape and a more affordable approach to customers’ needs.”
The report also reveals the challenges being faced by parents and guardians when a major health event occurs to an infant or child.
“Some families are forced to rely on loans or credit cards, the goodwill of others and even reaching out to charities for assistance,” Crabbe says.
“These families can go through a significant period of disruption, that can often include an inability for the caregivers to work. This loss of income can be exacerbated by unexpected out of pocket medical costs, coupled with increases in other outgoings, for example additional childcare expenses, travel and accommodation costs.”
Health advancements
There were some lights on the horizon in the report. Advancements in health diagnoses and treatments was one of the more positive findings. Improvements in mortality rates across a variety of conditions was something the report demonstrates compared with the previous report.
For example, the five-year survival rate for lung cancer was just 16 per cent, which has now improved to 23.5 per cent. It’s a reminder that while people are living longer, ongoing costs can continue, strengthening the role life insurance plays.
There are a few factors that have led to a shift in “subjective” claims. During the 1980s, almost one in four workers were employed in manufacturing, mining or agriculture. Today, that number is closer to one in 10.
“This change in the workforce, along with improvements in workplace safety, has seen a decrease in workplace injuries, falling by close to half over the last 15 years,” Crabbe says.
“Over the same period, mental health claims along have risen by 80 per cent and today represent one of the top three most common causes of claim at Zurich.”
Traditional working Total and Permanent Disability products were introduced at a time when catastrophic events often meant that someone would never be able to work again.
Crabbe says around one in three people who receive a TPD claim either return to work or are back looking for work after just a few years.
“It’s true that the ways in which people work has changed,” Crabbe says. “Not only that, but the number of different jobs have also changed, with many more today more likely to switch employers and career paths throughout their working life.”
The report demonstrates that different health events lead to different financial outcomes. The ability to continue to earn an income is certainly true for some, but a struggle for others, depending on the health event and severity of the condition.
“This was one of the drivers for Zurich’s recently released Continuous Care option, which better aligns the financial impact of a major TPD event with a customers’ needs, and at a cost effective premium,” Crabbe says.
