Australia s $3.1 trillion underinsurance crisis February 2012 CommInsure Life Insurance Survey Source: CommInsure Life Insurance Survey 2011
The underinsurance issue Australians are currently underinsured by $3.1 trillion* Only half - 56% - of us have life insurance Majority of those have insufficient cover Average advised client is insured for $308,212^ Non-advised clients insured for only $99,954^ 7 in 10 Australians know someone who s suffered a trauma, yet only 8% have trauma cover themselves. *Source: Rice Warner 2011 ^Source: KPMG and the Financial Services Council (FSC) Lump Sum Experience Study 2008 2
Australia is underinsured After a brush with death we re more likely to go on holidays (46%) than get insurance (34%)! Percentage of Australians 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 56% Life insurance National figures 47% 20% Life insurance Through super Separate from super 3
Young and low income earners most at risk Life insurance by age group Life insurance by household income 18-24 < $40K Age group 25-34 35-49 50-64 Household income $40K - $79,999 > $80K 0% 20% 40% 60% 80% Percentage of Australians Separate from super Through super Life Insurance 0% 20% 40% 60% 80% Percentage of Australians Separate from super Through super Life Insurance Younger Australians and low income households have the highest underinsurance rate. 4
Default cover Default cover remains the dominant insurance option Most of us (65%) settle for the default level of life insurance in our super funds automatic inclusion is the main reason why. Younger Australians are more likely to only have the default level of life insurance in their super fund than their older counterparts. Percentage of Australians 70% 60% 50% 40% 30% 20% 10% 0% Level of life insurance National figures 65% 18% 17% Default only Increased Can't say 5
We re indestructible Many Australians, particularly the young and healthy, believe they won t be affected by serious illness or injury*. One in six male workers aged 35-65 will likely suffer a disability which leaves them unable to work for six months or more*. *Source: Institute of Actuaries 2011 6
Key milestone insurance drivers Generational key drivers 18-24 Encouragement from family/friends 25-34 Birth of a child 35-64 Mortgage Why we take out extra cover Percentage of Australians 35% 30% 25% 20% 15% 10% 5% 0% 33% 26% 24% 18% 17% 19% 16% 14% 10% Most Australians take out extra cover, in their super fund, when they get a mortgage. 7
Education is key Less than half of Australians have ever sought financial advice The underinsurance problem, in part, stems from a lack of education about the importance of having the appropriate level of cover in place*. *Source: KPMG and the Financial Services Council (FSC) Lump Sum Experience Study 2008 Remember, the average advised client is insured for $308,212 Non-advised clients have just $99,954*. 8
What I have insurance in my super? Percentage of Australians 70% 60% 50% 40% 30% 20% 10% 0% Awareness of cover in super National figures 32% 58% 10% Aware Not aware Can't say Many Australians don t know they have life insurance through their super fund 9
Why Australians only hold minimal cover Many believe it s too expensive but for less than $30 a month a non-smoking man aged 35 can get $500,000 life cover. *Roughly $3 per day for coffee or $90 per month. Compared to the average cost of life insurance at just $30.99 per month. (Assumes a 35-year-old male, age 36 next birthday, non-smoker, degree-qualified accountant, Life cover of $500,000. Monthly premiums are quoted as at 19/10/11) 10
We re concerned about cost 62% of Australians are most concerned about covering everyday expenses Percentage of Australians 60% 50% 40% 30% 20% 10% 0% 26% 21% Why we don t get extra cover 26% 46% 56% 50% 40% 45% 30% are worried about funding retirement. What kind of retirement would you have if you? couldn t work again due to disability 11
The consequences of holding minimal cover How families would support themselves Percentage of Australians 80% 70% 60% 50% 40% 30% 20% 10% 0% 56% 40% National figures 70% 17% 31% 17% 65% More than half of Australians would have to rely on Centrelink if a family member suffered a terminal illness or passed away. 12
Many Australians would be out of pocket Average weekly income for working Australians $1,322 Average weekly Centrelink Disability Support Pension Less than $350 Disability support pension based on $689 per fortnight, single, basic rates as at 25/10/11 and average income figure is the earnings for a full time adult on ordinary time. 13
Summary of findings Only half of Australians have life and TPD insurance 58% don t know what insurance they may have through super Just 42% of Australians have ever sought financial advice Australians believe they can t afford insurance, it s not a priority and they have enough through super Mortgage the main driver to get insurance additional to default level in super 43% of Australians get cover outside super directly from providers More than half would have to rely on Centrelink if a family member suffered a terminal illness or died. 14
So ask yourself Do I have insurance? Do I have enough cover to insure my income and lifestyle if required? When did I last ask my adviser to review my insurance needs? Who do I have my insurance with? Do I have insurance in super?
These findings are based on an online study conducted by Newspoll for CommInsure during November 2011. 1220 adults aged 18-64 were surveyed nationally. Important information: This information was prepared by The Colonial Mutual Life Assurance Society Limited ABN 12 004 021 809 AFSL 235035 (CMLA) a wholly owned but non-guaranteed subsidiary of the Commonwealth Bank of Australia ABN 48 123 123 124 AFSL 234945. The information and examples are of a general nature only and have been prepared without considering your objectives, financial situation or needs and before acting on it, you should consider its appropriateness to your circumstances. Advisers and their clients should refer to the relevant life company documents for further clarification. CommInsure is a registered business name of CMLA.