A new study has highlighted a stark contrast in Australians’ insurance priorities, with individuals almost three times more likely to insure their vehicles than their income-earning potential.
The research, commissioned by the Council of Australian Life Insurers (CALI), suggested a growing gap in access to financial advice that may be leaving many underinsured.
The survey of over 5,000 working Australians found that while 79% of respondents have car insurance, only 34% hold life insurance.
CALI described the findings as indicative of a wider problem in the accessibility of financial guidance.
“The advice accessibility crisis in this country is leaving far too many people underinsured and unprotected when it comes to their future financial security,” said Christine Cupitt, CALI’s chief executive.
The survey broke down insurance trends across different age brackets:
The findings showed a consistent preference for insuring tangible assets like vehicles and homes, particularly among older Australians. However, life insurance uptake remains comparatively low across all age groups.
As cost-of-living pressures continue, the study revealed that almost half of respondents would forgo additional superannuation contributions before cutting other expenses.
Life insurance is among the first types of cover many Australians consider dropping, with policyholders three times more likely to cut life insurance compared to car or home insurance.
The Australian Prudential Regulation Authority’s (APRA) latest figures for June 2024 reflected mixed outcomes for the life insurance sector.
While overall insurance revenue remained steady at $5.9 billion, the insurance service result dropped from $579 million in the previous quarter to $457 million. Investment income also saw a steep decline, falling from $1.9 billion in December 2023 to $297 million by June 2024.
CALI emphasised the need for greater access to affordable advice and highlighted the industry’s role in addressing Australia’s underinsurance issues.
“This is about people building strong financial safety nets for themselves and their loved ones. Getting the right advice can set them up for the future; getting no advice can leave them with nothing to fall back [on] when times get tough,” Cupitt said.
The report underscored the need for financial advice reform. Current regulations limit life insurers to offering only general advice, but CALI argues that customers increasingly seek more tailored guidance.
It found that 40% of respondents want personalised advice on how much coverage they need and which products are suitable for their circumstances.
Proposed changes under the federal government’s Delivering Better Financial Outcomes reforms aim to address this gap. The legislation would allow life insurers to provide specific advice when requested, at no additional cost to consumers.
Cupitt noted that fewer than 25% of respondents want only basic information. This demonstrates the importance of reforms to provide the kind of advice Australians are asking for.
