Insurance crisis will see most locked out of cover

Speaking as part of an FSC panel last week, TAL chief executive Brett Clark said the question of long-term access to life insurance “needs to be solved” as consumer access to affordable products slowly narrowed due to increasing restrictions on advisers and rising premiums.

“Any healthy industry should be growing, not for growing’s sake but because there’s an ongoing consumer need for the products and services that we provide and we need to meet those expectations,” Mr Clark said.

“But if you reflect on the last few years, access to life insurance, choice and channel and those sorts of things has tightened up considerably. I think that question does need to be solved in the longer term for the sustainability of the industry.”

Mr Clark said if current price and new business trends persisted, the majority of consumers would be locked out of access to insurance products that met their needs.

“If current dynamics continue to play out, it seems to be polarised between some people in super who have very low default levels of insurance cover, other people in the community who can afford access to advice and potentially high cost insurance products, and very little in the middle where most consumers sit,” he said.

“If you look over the horizon and that plays out, that’s a pretty poor outcome for industry, a pretty poor outcome for consumers and for government because it has an effect on public welfare.”

Mr Clark’s comments follow remarks from TAL general manager of retail distribution Niall McConville at the recent AIOFP Conference that new business in life insurance had plunged from $763 million in 2013 to $325 million in 2020.

“This is an important part of the industry if you’re trying to get a lot of momentum in the market and build a brand and you can see how much that has changed in the last few years,” Mr McConville said.

“The market has come off well over 50 per cent.”

Mr Clark said drastic changes needed to be made within the business model of life insurers to keep coverage affordable and attractive for consumers.

“We need to keep two principles front of mind – how do we get benefits to consumers who need them as quickly as we can, and secondly keep the products valuable and affordable for everyone,” he said.

“It goes to product, channel, how we present the products, intermediaries, underwriting, claims handling, the whole ecosystem.”