Consumers’ needs are evolving because they are living longer and healthier lives. In Australia, life expectancy is among the highest in the world, with the average male living to age 80.7 and the average female living to the age of 84.9 years (Australian Bureau of Statistics, 2019).
According to a United Nations report, it is anticipated the global population will reach 8.5 billion in 2030 (in 2019, it was approximately 7.7 billion).
Further, the global population is ageing at an unprecedented rate.
In 2018, people over the age of 65 outnumbered children under the age of five for the first time in history. In Australia and New Zealand in 2019, 15.9% of the population was aged 65 or over, a figure expected to rise to 19.5% (almost 1 in 5 people) by 2030 (United Nations 2019)
The main concern for working-age Australians has historically been about protecting against premature death or an accident or physical sickness, but today there is greater focus on the impact of mental illness.
Mental Health Claims
The life insurance industry paid, on average, $95,000 to approximately 8,500 Australians that experienced mental ill-health in the year ending June 2018 (Life Insurance Industry 2020).
Underinsurance remains a significant issue in Australia. Most Australians have inadequate levels of Life cover, Total and Permanent Disability cover and Income Protection cover. In most cases, their cover would only provide 28% of the total required to maintain their existing standard of living.
Many consumers do not know how to calculate their insurance needs, and many say they would not have insurance if it wasn’t part of their super – both of these are contributing to people not having enough insurance
Life insurers paid $10.5 billion in claims in the year to March 2019. According to APRA data, life insurers paid claims to approximately 100,000 Australians in the year to December 2018, with 93% of claims having been paid in the first instance (Financial Services Council 2019)
It will become more critical for life insurers in the years ahead to offer more holistic solutions to consumers and businesses. Life insurance companies have a responsibility to educate consumers so that they understand the importance of life insurance and the kinds of cover available.
Financial advisers can then provide advice on the appropriate sum insured, selection of the product, affordability of premium over the short term and long term, and ownership structure of the policy based upon the client’s individual needs, goals and financial objectives.
Every industry is being pushed to change how it interacts with customers, and COVID-19 has certainly accelerated that. With technology, consumers can effectively research products, transact and manage their financial affairs online.
As a result, many of the world’s leading insurance organisations have embarked on bold, wide-ranging digital transformation programs to reshape how they interact with people and other businesses.
Insurance organisations, including life insurers, have successfully integrated technology into their products and services, as well as their delivery to customers.
The life insurance industry, as a whole, needs much better communication around payment of claims, because there is a disconnect between what consumers believe and what really occurs.
Contrary to commonly held perceptions, demonstrate that not only are claims paid, but that payment is made in a timely manner (APRA 2019).
The story is even better where an adviser is involved in terms of the number of admitted claims and the period within which claims are finalised.
Change is occurring across all areas of life, and the life insurance industry should seize the opportunities to deliver best-in-class customer experiences.
The industry must respond to the needs of consumers who will live longer and increasingly expect affordable coverage incorporating mental illness. As more of the buying population is made up of consumers who favour digital transactions, options for these consumers will be crucial, as will products that cater for an increasingly broad range of insureds.
Opportunities abound to ensure the role of the adviser in the life insurance process remains pivotal and valued. Advisers’ expertise will assist clients to navigate a perhaps increasingly complex product landscape and select products best suited to their individual needs.