Industry facts page
A majority of Australians are significantly underinsured
Despite the fact that almost every working Australian has a level of life insurance cover within their superannuation, Australia has proved to be one of the most underinsured nations in the developed world.
A 2008 survey by the Australian Institute of Superannuation Trustees (AIST) and Industry Funds Forum (IFF) revealed that “one in two industry fund members were underinsured by $100,000 or more”i.
Specifically results of the survey showed that:
1. 50% are underinsured by $100,000 for life insurance.
2. 74% are underinsured by $100,000 for TPD.
3. 45% are underinsured by $1000 a month for income protectionii.
Rice Warner Actuaries estimate that life insurance cover within super is on average only 20% of what is needed.
Research commissioned by IFSA in 2005 showed that only 4% Australian families with dependent children have adequate levels of insurance cover (that is 10 times earnings as recommended by Rice Warner Actuaries). This means that Australian families are critically underinsured to the tune of $1.37 trillion.
Rice Warner Actuaries says underinsurance costs Australian tax payers over $250 million a year
Rice Warner Actuaries estimates the additional social security payments arising from deaths of parents with limited insurance to be in the order of $250 million per year.
And this estimate does not take account of other costs/losses to government revenue such as provision of housing and loss of income tax revenue.
Most Australians don’t value their most important asset – their ability to earn an income
83% of Australians say they have insurance for their car iii .
Only 31% insure their ability to earn an income with income protection insurance iv .
Most Australians think it won’t happen to them – ‘She’ll be right’ won’t she?
The OnePath Life (formerly ING Life) Research Optimistic Australians report (December 2008) surveyed the opinions of Australians aged 25 to 65 and found:
89% said they were not likely to have an accident (making them unable to work) in the next 20 years
80% said they were not likely to suffer a serious illness in the next 20 years
83% did not expect to pass away in the next 20 years
A range of other factors stop Australians from insuring themselves
Low levels of awareness – 40% of industry super fund members never really think about insurance v
A perception that life insurance is too expensive is a major barrier – 81% say life insurance is too expensive, yet 61% over estimate cost vi .
37% of industry super fund members believe life insurance is a low priority given other financial commitments vii .
A lack of understanding stops 1 in 3 Australians without life insurance outside their super from taking adequate cover viii .
41% say life insurance is too complicated. 1 in 4 don’t know where to start, 1 in 5 say it’s too hard to select a product that meets their need ix .
63% of those with a partner say they have not discussed life insurance with their partner. 29% say life insurance is too unpleasant or difficult to discuss x .
But most of us will experience an insurable event in our lives
More than 50,000 people were hospitalised due to transport accidents in 2005-06 with over 5 days in hospital. The majority of those (81%) were working age xii .
Over 1,600 people die on Australian roads every year, most aged 26 – 59 years xiii .
One third of women and a quarter of all men will suffer cancer at some stage in their lifetime – over half of whom will live for longer than five years after diagnosis xiv .
High levels debt and relatively low levels of national savings mean most are unprepared for the unthinkable
Household debt in Australia grew twice as fast as the value of household assets over the last 18 years. The ratio of household debt to assets has doubled from 9% to 19% xv .
With over 5.7 million households in Australia, the average amount of debt is $128 000 per household[xvi]. For Australian families with children under the age of 5, the median amount of debt is $167,000 xvii .
Australia’s net household savings ratio is 6.6% xviii , which means that for every $100 earned, Australians save almost $7. The net savings ratio has grown in recent months, largely due changes in saving behaviour as a result of the GFC.
The cost of raising two children at Government schools to year 12 and then 3 years of university is around $537,000 xix .
80% of Gen Y’s consider making money to be important in their future and 93% believe saving investing will be very important at age 35 xx .
Life insurance is more affordable than people think
The monthly premium for a 35 yr old male, non-smoker applying for $500,000 of Life cover would be approximately $30. A 35 yr old female, non-smoker applying for $500,000 of Life cover the monthly premium would be $25.
If you have some existing cover through your super, increasing this to adequate levels may cost even less.
i AIST Media Release, Tuesday 3 rd June 2008
ii AIST Media Release, Tuesday 3 rd June 2008
iii AAMI Fact Sheet, Shopping for Car Insurance, September 2008
iv TNS/IFSA Investigating Income Protection Insurance in Australia July 2006
v Source: Industry Funds Forum Insurance Study of Industry Fund Members, June 2008
vi OnePath Life (formerly ING Life) Australia’s Attitudes Towards Life Insurance, December 2008
vii Source: Industry Funds Forum Insurance Study of Industry Fund Members, June 2008
viii Source: CommInsure Life Insurance Survey 2004
ix OnePath Life (formerly ING Life) Australia’s Attitudes Towards Life Insurance, December 2008
x OnePath Life (formerly ING Life) Australia’s Attitudes Towards Life Insurance, December 2008
xi AIHW Injury Research and Statistics Series No. 42, 2005-06
xii Australian Government, Road Deaths Australia 2007
xiii Cancer Council: (www.cancer.org.au), Cancer in Australia: an overview, 2008 Australian Institute of Health and Welfare (published December 2008)
xiv ABS, Australian Social Trends, Household Debt, cat. no. 4102.0, 2009
xv ABS, 2005-06 Survey of Income and Housing
xvi ABS, Australian Social Trends, Household Debt, cat. no. 4102.0, 2009
xvii ABS, 5206.0 – Australian National Accounts: National Income, Expenditure and Product, Dec 2008