The fall in the road toll, the decrease in the number of people smoking and the recent awareness of safe levels of alcohol consumption are some of the truly great public education campaigns I have seen in my life – and I hope to soon see the message about underinsurance ranking alongside them, particularly in support of middle Australia.
Superannuation funds have played a significant role in helping to address this issue through the provision of default levels of life cover and, in more recent times, default cover designed on a needs-based approach.
While the industry continues to implement measures to try to assist, a clear challenge exists for us as a community, not just as an industry. How can we best engage with the engine room of our economy to reduce its exposure to the financial impacts of premature death or disability? And what is the most effective way of motivating the middle market to consider increasing their life protection?
According to the Australian Bureau of Statistics, the average working full-time adult earnings in Australia in May 2009 was $1243.50 a week, or almost $65,000 a year, while RP Data Research says the median house price in Sydney in June 2009 was around $530,000 and about $90,000 less than that in Melbourne. Put simply, we all know it takes a lot of hard work to pay off a mortgage.
Households have myriad other expenses, such as electricity, water and food, as well as a range of discretionary spends. And, of course, not all of us actually own our homes so often the rent also needs to be met.
Let’s face it, there are an awful lot of expenses faced by middle Australia and hard financial decisions are being made, but as an industry we have much work to do in successfully communicating the benefits of insurance to this prime audience.
As someone who has spent most of their career in the life industry, I am regularly affected when I read about people who either did not have insurance or were underinsured following a personally devastating event. When you think that the fortnightly cost of a movie ticket could acquire $500,000 cover for a healthy 40 year old, it seems a small price to pay for peace of mind.
I believe part of the answer is for life insurers to engage the middle market by making it easy. That may sound rudimentary but we all know it’s not that simple. Clearly, people do not even know they need cover – let alone understand it and how to obtain it. So exactly what does making it easy mean and how do we do it?
The answer may be to add a layer of simplified guaranteed issue cover to the existing default cover structure. That cover should be easy to understand, easily accessible and affordable. This has to be a better solution than relying on the use of complex technical jargon that even people in the industry find difficult to understand. And it would avoid making those who do actually recognise they have a need for life insurance jump through hoops to get it.
We all need to play a part in assisting to educate the middle market, in a simple and easy to understand manner, about exactly how to increase their levels of insurance, what it costs and, most importantly, what the benefits are.
This is a challenge for all of us in the life insurance industry, but together we have the opportunity to really make a difference by doing our part to simplify our own industry.
The message needs to be passed on to working Australians that it is actually very easy to arrange an increase in life insurance, particularly through superannuation funds. In many cases it is as simple as contacting your superannuation fund via any one of multiple channels – phone, website and so on. Or internal human resources departments can request that interested staff fill out a form to increase cover, either in paper or electronic form.
By implementing simplified benefits and easier mechanisms of accessibility, such as electronic short answer forms that include yes/no answers, very reasonable sums of insurance can be provided without the need for medical information, so long as the individual does not have any major undeclared health conditions.
I wholeheartedly support initiatives such as the Investment and Financial Services Association’s Lifewise program, which is helping the message about underinsurance get some traction in the wider community. But more needs to be done and AIA Australia, which provides group insurance cover through its clients to almost 11 per cent of the population, is striving every day to play its part. I am pleased to say we are well advanced with a program of work designed to make a positive impact on this systemic challenge.
