What is driving life insurance policy cancellations?

Research from the Council of Australian Life Insurers (CALI) last year found that 68 per cent of Australians are concerned that the high cost of living will hinder their ability to continue affording their life insurance cover, while 23 per cent said they would consider cancelling their cover if affordability were to become an issue.

Meanwhile, the latest statistics from DEXX&R’s latest Life Analysis Report revealed growing attrition rates and drops in premiums across the board for the year to September 2024.

In exploring this trend, iExtend identified a range of key factors driving life insurance policy cancellations in Australia, one of which is the increasing cost of premiums.

According to Deloitte’s 2025 Global Insurance Outlook, life insurance premiums are expected to rise by 1.5 per cent in advanced markets this year, which iExtend claimed “erodes confidence in the value of sustaining life insurance for the long-term”.

This is compounded by sustained cost-of-living pressures with the 2.4 per cent rise of the consumer price index in the 12 months to the December 2024 quarter, leaving many looking for ways to cut discretionary spending.

Plus the inability to access affordable financial advice, largely as a result of the sheer lack of operating advisers, with Wealth Data finding just 15,516 active advisers as of the week ending 23 January, and compounded by the rising operating costs for advice businesses.

As a result, iExtend said many Australians are unable to consult a professional and assess their options prior to cancelling life insurance policies.

Meanwhile, chronic health conditions have become increasingly prevalent among Australians, with two in five (39 per cent) Australian workers living with a chronic condition, which may significantly impact their life insurance policies and lead them to simply cancel their cover altogether.

Furthermore, as Australians continue to age and the intergenerational wealth transfers and subsequent changing hands of around $3.5 trillion in assets by 2050, iExtend suggested that wealth redistribution and estate planning could impact decisions regarding the holding of life insurance policies.

Chief executive of iExtend David Sarkis said that in the current uncertain economic environment, more Australians may waiver in their commitment to life insurance cover, leading more to consider cancellation.

“As a result of a range of financial and demographic pressures, we have seen more Australians change their view of their life insurance and are seeking to cancel it,” Sarkis said.

“The impact the cost of living is having on life insurance cannot be underestimated, with many Australian households feeling the pressure of daily life, leading them to consider cancelling their policies to alleviate the immediate burden of meeting premium payments.

“iExtend is working with advisers and their clients to ensure they make informed choices about the future of their life insurance policies, decisions which impact families and generations of Australians.”