Why Australians are suffering from underinsurance

Speaking to ifa about the state of the insurance industry, MetLife’s chief distribution officer Michael Mulholland said it is becoming increasingly difficult for advice businesses to serve all Australians in a cost-effective way.

“This is leading to a lack of affordability for advice for most Australians and contributing to the nation’s level of underinsurance in Australia,” Mr Mulholland said.

“This urgently needs to be addressed along with adviser remuneration structures, to help with the accessibility of insurance and to foster a sustainable business model for advisers to better service all Australians seeking advice.”

Mr Mulholland’s comments come after ClearView managing director Simon Swanson said the complexity within the advice process must be removed to improve affordability for Australians.

“An important step towards making financial advice more assessable and affordable is to simplify the advice process and remove unnecessary complexity,” Mr Swanson told ifa.

Meanwhile, in an address to the Insurance Council of Australia’s virtual industry forum in October, APRA deputy chair Helen Rowell outlined “looming” issues that the insurance sector must address in regards to accessibility and affordability.

“Along with an expectation gap, there is a clear protection gap looming that is potentially larger than perhaps we have observed in the recent past,” Ms Rowell said.

“This is not necessarily a problem confined to Australia and is one our peer regulators offshore also grapple with. Of course, it is entirely within an insurer’s rights to decide which risks to select, and which to avoid.

“However, when risk exclusion and avoidance burgeon across multiple products and insurers, it leads to prices that are unaffordable, or products that are simply not available. The obvious impact to consumer confidence, the wider economy and prosperity follows.”

Ms Rowell added that factors contributing to declining affordability and accessibility are complex and called for collective action from regulators as well as federal, state and local governments.

Neil Griffiths

Neil is the Deputy Editor of the wealth titles, including ifa and InvestorDaily.

Neil is also the host of the ifa show podcast.