Australia behind in life insurance accessibility and affordability

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According to a recent study by the Swiss Re Institute, Australia ranks lower than other advanced economies and emerging markets in life and health insurance availability, accessibility, and affordability.

The report evaluated 16 economies, with Australia placing seventh with an aggregate score of 0.52. A score closer to 1 represents a high level of inclusion, while a score closer to 0 indicates a lack of inclusion.

The study also included 11 emerging markets, with South Africa and India among them. The findings suggest that a key driver of availability is the provision of a wide range of cover types and innovative product options to suit consumer needs.

The report notes that regulatory changes following the Hayne royal commission may have contributed to the lack of availability in the Australian market. However, the Quality of Advice Review (QAR) recommendations could help restore better levels of inclusion for consumers.

Australia ranks lower than other advanced economies and emerging markets in life and health insurance availability, accessibility, and affordability, according to the Swiss Re Institute’s Life and Health Insurance Inclusion Radar report.

Key findings include:

  • Australia placed seventh with an aggregate score of 0.52, with a score closer to 1 representing a high level of inclusion and a score closer to 0 indicating a lack of inclusion.

  • The United States, Japan, Canada, South Africa, the United Kingdom, India, and Australia were evaluated, with the US securing the top spot with a score of 0.67.

  • Australia was particularly disappointing regarding the availability of life and health insurance, with a score of 0.47, well below the advanced market average of 0.67 and that among emerging markets of 0.53.

  • In advanced markets, a key driver of availability was the provision of a wide range of cover types and innovative product options to suit consumer needs.

  • Swiss Re flagged that the Quality of Advice Review (QAR) could restore “better levels of inclusion for consumers” and suggested that the reason for Australia’s poor performance in this area could be associated with regulatory changes following the Hayne royal commission.

Recommendations include:

  • Among the 22 recommendations handed down by the lead of the QAR, Michelle Levy, one concerned the provision of life insurance. Under this recommendation, Ms Levy advised the government to retain the exception to the ban on conflicted remuneration for benefits given in connection with the issue or sale of a life risk insurance product.

  • The QAR had recommended retaining the current LIF levels for commission and clawbacks, but this came with a condition that providers of personal advice must explain to their clients that they will be paid a commission and ask for the client’s consent to accept the commission.

  • Providers of personal advice must explain to their clients that they will be paid a commission and ask for the client’s consent to accept the commission.

  • Australia should focus on providing a wide range of cover types and innovative product options to suit consumer needs to increase availability and inclusion in life and health insurance.