Australia’s life insurance sector is likely to show a compound annual growth rate of 5.9% (CAGR) from $23.3bn in 2023 to $30.4bn in 2028, in terms of gross written premiums (GWP) according to a recent GlobalData analysis.
The analysis said the Australian life insurance sector is set to accelerate its growth trajectory in 2024, driven by favourable macroeconomic and demographic factors that include a stabilising economy, an ageing population, low unemployment rates and improved investment returns. Asia Insurance Review spoke to the Council of Australian Life Insurers (CALI) CEO Christine Cupitt about these and other issues.
Genetic testing
Speaking about the Australian life insurers’ position on the use of genetic test results, Ms Cupitt said, “CALI supports a ban on the use of genetic test results in insurance underwriting to help empower Australians to manage their health proactively.”
Ms Cupitt said as genetic testing is becoming more prevalent in the community, “so now is the time for a federal government regulation to ensure no one is deterred from taking a genetic test.
“Australia’s life insurers want to support people to manage their health in a preventative way and recognise that genetic testing plays an important part in empowering them to do so.”
She said it has never been the intention of the life insurance industry to deter people from taking genetic tests that give them more information about their overall health. In fact, the majority of Australians with life insurance (approximately 15m people) obtained their cover without ever having to disclose the results of a genetic test.
When a person does disclose the results of a genetic test to a life insurer, it often works in their favour by indicating a reduced risk of a certain genetic condition. In more than 80% of cases, there is no impact on the final underwriting decision.
Ms Cupitt said CALI members want to provide protection and certainty to as many Australians as possible. Declining to offer a cover is rare and always a last resort for life insurers. “Australia’s life insurers have never, and would never, require someone to take a genetic test for the purposes of underwriting.”
CALI supports strict regulation on the use of genetic test results in underwriting with limited government approved exclusions to guarantee fairness for all insured Australians.
Financial advice shake-up
Asked how soon CALI expects to see results from the financial advice shake-up that allows life insurers to advise customers directly, Ms Cupitt said, “The government’s Delivering Better Financial Outcomes package will ensure Australians have more choice and better access to affordable advice when they need it most, so they can make informed decisions about how to protect their future.
“We look forward to seeing changes implemented because it will mean Australians will no longer have to wait in line to pay $3,500 on average for financial advice,” she said.
This will allow life insurers to provide limited advice directly to their customers through a new class of advisers. These advisers will be required to meet an education standard mandated by the government.
The Delivering Better Financial Outcomes package is about allowing life insurers to help customers on simple matters that have to do with their products. It complements the work being done by professional financial advisers across the country.
For many Australians, getting advice has been too expensive and inaccessible with just 1,000 financial advisers nationwide who regularly help people navigate life insurance products.
Independent research commissioned by CALI shows that in the past three months alone, a third of Australians (32%) have shown an interest in getting professional financial advice but just 10% have received it.
“Better access to affordable financial advice, including directly from Australia’s life insurers, is fundamental to ensuring the industry can best serve its customers now and into the future.”
Life Insurance Code
Elaborating on the governance of the Life Insurance Code of Practice, Ms Cupitt said, “At CALI, part of our mission is to ensure that Australians view life insurance and the industry as accessible, understandable and trusted. It is through this consumer-focused lens that we took over governance of the Life Insurance Code of Practice (Life Code) in 2023.”
The Life Code sets standards higher than the law to expand Australians’ access to the life insurance protection that suits them when they need it most, in a fair, transparent and accountable way. It delivers tough penalties for conduct breaches and strong independent enforcement.
Industry’s profitability
Speaking about the short-, medium- and long-term solutions to make the life sector in Australia profitable again, Ms Cupitt said, “The life insurance industry in Australia is well capitalised, vibrant and strong. However, the right regulatory settings are important to ensure our industry remains sustainable, efficient, profitable and of course trusted in the short, medium and long term.”
She said, “There are still legal barriers that affect the availability of certain product features in Australia, which are popular in other countries.”
Ms Cupitt said these barriers currently prevent the Australian life insurers from providing those product features here, and in some instances make it difficult for both private industry and governments to deal with emerging health issues in Australia.
She said the industry believes there is scope for expansion of both life and health products to fund evidence-based preventative interventions.
Grooming talent for future
Speaking about grooming talent for the future of Australia’s life insurers, Ms Cupitt said, “Each company has its own approach when it comes to attracting a strong pool of talent to our industry.”
She said, “One of the most attractive elements of working in the life insurance industry is the deep social and economic purpose behind our work. People who work in life insurance come to work every day with this deep social purpose in mind, which helps put the Australian customer at the heart of everything we do.”
Ageing Australia
As Australians live longer, they’re spending more time in retirement. There are 5m people who are at, or approaching, their retirement. It is clear there is a significant demographic change and longevity risk facing Australia.
Ms Cupitt said, “CALI members play a critical role in helping give Australians peace of mind during their working life as they accumulate their superannuation. But life insurers can also continue to play that role well beyond a person’s working life, through providing stable and secure retirement income products backed by capital held in Australia.”
She said, “Globally, the role of life insurers in providing longevity risk protection products is well established and insurance providers have substantial expertise in efficiently pricing and managing longevity risk.
“CALI continues working closely with the government on its reforms and believes that allowing life insurers to provide limited advice is an important change that will improve customer experience and outcomes.
“Choice and control are especially important to ensuring a person experiences a dignified retirement. Improving information and tools, as well as introducing some nudges to steer people towards products that better suit their needs. That would help guide retiring Australians towards better product options to manage their finances and live a dignified life through all stages of retirement,” she said.
Inflation can impact the affordability of life insurance. At times of uncertainty, the peace of mind that life insurers provide to Australian customers is critical, particularly as millions of Australians grapple with significant cost of living pressures.
“Life insurers offer a variety of flexible options to help people continue to protect themselves and their family. They include reducing the cost of premiums by changing the sum insured, removing optional benefits, suspending premiums and cover on a temporary basis as well as providing payment plans, premium waivers and premium discounts,” she said. A