Life insurance offers a safety net for individuals and their families in case of unexpected events such as illness, injury, or death. In Australia, life insurance has become an integral part of the financial planning process, with millions of Australians relying on insurance to protect their loved ones financially. With the Australian life insurance market evolving rapidly, it’s important to understand the latest trends and developments in this industry.
Increasing focus on mental health
Life insurance providers are increasingly focusing on the impacts of mental health on the industry. In recent years, there has been a significant increase in the number of Australians seeking help for mental health issues such as anxiety and depression, with flow on effects on claims particularly for Income Protection and Total & Permanent Disability.
The insurance industry has been hard hit by these increase in claims which has seen significant premium increases and an emerging consideration of products which could voluntarily exclude mental health claims in order to reduce premiums
Premium increases
Over the past few years, both existing and new policy holders have experienced significant increases in premiums. This is due to a range of factors, including:
- Ageing risk pool – with fewer young people entering the life insurance pool due to changes in default cover within super, the risk pool for insurance products continues to age causing premiums to increase reflecting the higher risk of health issues and mortality that come with age.
- Increased claims – due to an increase in the number of claims made on life insurance policies, insurance companies have needed to increase premiums to cover the costs of these claims.
- Low investment returns – life insurance premiums are often tied to the investment returns the insurer can generate. Due to poor yields, particularly in bonds, insurers have failed to generate the investment returns expected and have had to increase premiums to make up for the shortfall.
It’s worth noting that these factors may not apply equally to all insurers, and the specific reasons for premium increases may vary depending on the insurer and the policy. It’s a good idea to speak to an insurance adviser to understand the specifics of your policy and any premium increases.
Utilisation of technology
Additionally, there is a growing trend towards the use of technology in the life insurance industry. Many life insurance providers are now using digital tools such as artificial intelligence and machine learning to improve the accuracy and speed of underwriting processes. This means that consumers can now get coverage faster and more efficiently, with less paperwork and fewer hassles. Technology is also being used to create more personalised policies and to provide better customer service through online platforms and mobile apps.
The Australian life insurance market is evolving rapidly, with new trends and developments emerging all the time. From the increasing focus on mental health, significant premium increases, utilisation of technology and data analytics, and decreasing access to Life Insurance financial advice, it has never been more important to engage with a qualified risk professional to ensure the financial security of your loved ones is properly looked after.
This article was first published in Personal Wealth Adviser, issue 6.