Confusion around life insurance leaves Australians vulnerable
A recent whitepaper sets out the challenges to people accessing adequate life insurance cover. Brought to you by NobleOak.
For many Australians, life insurance is confusing and packed with unfamiliar terminology, and there is a widespread tendency to underestimate levels of cover that people may need.
There are also low levels of understanding about the different types of life insurance and what is more appropriate for various life stages and different situations. For many, even the path to purchasing life insurance is unclear.
“Life insurance is a bit of a puzzle for many people,” says Anthony Brown, the CEO of NobleOak Life Insurance.
“Some people don’t even know if they have life insurance. And more than half of those with life insurance grossly overestimate how much they have,” he says, referring to findings in NobleOak’s whitepaper, Confusion Around Life Insurance Can Lead to Unprepared Customers, released in February 2020.
Australia has long had a considerable underinsurance problem. NobleOak’s whitepaper found that the number of consumers purchasing life insurance dropped from 56% in 2018 to 47% in 2019.
According to the Underinsurance in Australia 2017 report, released in 2018 by independent research firm Rice Warner, only a third of working age Australians have income protection insurance. Other categories, including trauma, total and permanent disablement and business expenses insurance, have similar rates of underinsurance.
Lost homes and lifestyles
The impacts of underinsurance on a macro level were seen in the wake of the 2009 Black Saturday bushfires in Australia. The fires left 173 people dead and were the worst bushfires on record in Australia in respect to human lives lost.
“It was such a terrible tragedy and only A$1 million was paid out in life insurance claims,” says Brown.
“A lot of the people who lost their lives were breadwinners. Their houses were burnt down, and although many of those houses were rebuilt, because their families didn’t have an income they weren’t able to fund the mortgage and other household and family expenses. So those families still lost their homes.”
On an individual level, underinsurance can result in significant financial difficulty for the loved ones left behind. Brown gives the example of a 45-year-old income earner with a partner and three children, who has half a million dollars in mortgage debt.
“If that person passes away, their partner would have to pay off any debts, including their mortgage, and wouldn’t be able to support their existing lifestyle, including monthly expenses such as their kids’ education. These costs are very significant if they are attending private schools.”
Roadblocks to buying cover
NobleOak’s whitepaper found that one of the biggest barriers to purchasing life insurance is its perceived cost. Of the 1000 respondents surveyed for the whitepaper in December 2019, 30% cited this as a reason. However, Brown says many people overestimate the costs.
Another roadblock is the mistaken assumption that life insurance is already provided by a superannuation fund. While some level of cover is often provided, people often review their level of cover and top it up with cover available outside of their super.
Yet another barrier is a lack of confidence in the industry in the wake of Australia’s Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, completed in early 2019.
Almost a third of survey respondents said they were not confident that the issues identified by the royal commission would be fixed, compared with just 18% who were confident.
Against these challenges, NobleOak sets itself apart and continues to build on its 140 years of heritage.
“One of our core values is simplicity,” says Brown. “Our products don’t have overly complex terms or exclusions. It’s simple: what you see is what you get. Our clients are all fully underwritten on an individual basis, meaning we ask them more questions up front to provide greater certainty at claim time.”
With NobleOak term life cover, CA ANZ members will also receive a 10% lifetime discount*.
“We’re a purist, Australian APRA-regulated life insurance company and not part of a large conglomerate. We don’t offer other products and we keep our overheads low. This allows us to focus more on service and claims, and less on other costs,” says Brown.
“We’re a purist, Australian APRA-regulated life insurance company and not part of a large conglomerate.”
NobleOak Life Limited ABN 85 087 648 708 AFSL 247302 issues NobleOak life insurance products. See the product disclosure statement (PDS) for product details. General information only – not financial advice. Online quotes are indicative only – your premium will take into account your age, occupation, sum insured, health and pastimes. You should not cancel any existing life insurance policy until you have been informed in writing that your new cover is in place.
* Discount information – CA ANZ members are currently entitled to a 10% discount on NobleOak’s usual premium rates for its term life cover.
Find out more:
For an instant quote, visit nobleoak.com.au/charteredaccountants or phone 1300 108 490 and mention ‘chartered accountants’. Cover available for Australian residents only.
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