The life insurance market in Australia has faced significant challenges in recent years. From the paralysation of insurers and the advice profession to a sharp decline in the number of new lives insured—from 103,000 in 2018 to just 44,000 in 2023—the industry has been forced to adapt to a new reality. This adaptation involves a comprehensive reset and adjustment to a rapidly evolving paradigm with a critical focus on stabilising and strengthening support systems for financial advisers and leveraging technology to enhance product penetration and customer satisfaction.
Consumer perception of life insurance is a critical area. Our recent consumer survey, part of our research for the 2024 Australian Financial Advice Landscape Report, showed that most consumers believe having life insurance is a valuable and important financial decision, though a smaller portion disagrees. Despite this general agreement on the importance of life insurance, almost half of Australians do not have coverage. Knowing this, it is crucial to understand why so many Australians remain uninsured despite acknowledging the need for life insurance.
The same survey revealed that a significant portion of consumers are unable to accommodate additional expenses in their budget. For those consumers without life insurance, nearly 40% could afford a life insurance policy or the services of a financial adviser. As seen in Figure 1 below, notably, more than 80% of individuals without life insurance also lack a financial adviser. This indicates a significant untapped market for financial advisers to offer tailored life insurance solutions, ensuring that consumers are well-informed about their policies and the security of their savings.
Figure 1: Consumers without life insurance
Source: Adviser Ratings’ Australian consumer survey 2024
Frequent and rich communication from advisers can be a game-changer. Alarmingly, more than 30% of policyholders are unaware of the specifics of their life insurance coverage, likely due to the impersonal nature of obtaining insurance through superfunds. As seen in Figure 2 below, most Australians acquire insurance through their superannuation funds, with fewer than 10% purchasing life insurance through a financial adviser.
Figure 2: How consumers purchase life insurance
Source: Adviser Ratings’ Australian consumer survey 2024
Offering differentiated services, such as more personalised and informative client interactions, would help advisers gain market share. On the supply side, life insurance services are predominantly provided through licensees. However, there is a growing trend of companies with their own Australian Financial Services Licence (AFSL) offering life insurance products through dealer-to-dealer service providers or other external groups. This shift highlights the need for practices to specialise in life insurance services, providing a more personalised and informed experience for clients.
In conclusion, the Australian life insurance market holds significant potential for growth and development. Financial advisers have a considerable opportunity to offer life insurance products that consumers understand and appreciate, addressing the current gap in awareness and personalised service seen with superfunds. For practices, there is a chance to specialise and provide distinctive life insurance services, thereby enhancing client relationships and satisfaction. By uniting around a common goal, the life insurance industry and the advice profession can implement strategies and investments that ensure profitability for both advisers and insurers, ultimately benefiting policyholders.
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