ANZ’s white paper Life insurance: the case for change examines how the industry can collectively rebuild public confidence while delivering better, more accessible and affordable products to meet our customers’ expectations and circumstances.
Australians need to feel certain insurance, as an industry, will deliver on the promise to support them to return to their former health and prosperity if they suffer illness or injury.
With each public controversy undermining the reputation of the entire sector it is clear the ‘case for change’ rests on our collective response, to rebuild a sustainable industry that protects more Australians.
Resolving the issue
A combination of public mistrust towards insurers and the need for more affordable, accessible cover has resulted in Australians being alarmingly underinsured.
Current research by Rice Warner has found the median family’s life cover meets only 61 per cent of a family’s basic needs and 37 per cent of the income replacement level required to maintain current living standards until 65.
ANZ’s whitepaper cites the Life Insurance Code of Practice’s introduction of minimum medical definitions for some of the most common causes of claim, including heart attack, stroke and cancer, as a recent attempt to align the sector with customer expectations.
This transparency needs to extend to clearer product documentation as well as a greater advocacy of the adviser’s role in supporting customers to identify the right cover for their circumstances.
Providing customers with an understanding of their cover choices is important. However, this is irrelevant if the cover is still unaffordable and premiums remain on the rise.
Increasing claim costs have put the sustainability of some life insurance products at risk. ANZ’s whitepaper finds insurers continue to make losses on disability products, particularly individual disability cover, as claim costs rise rapidly. Over the past three years the sector has lost more than $A1 billion on individual disability policies.
The essential purpose of disability insurance is to financially support the customer as they recover and return to their pre-claim working life.
However, unprecedented change in technology and the workplace, alongside the recent economic downturn has resulted in a decline in claimants returning to their pre-claim work hours.