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Elsewhere in this issue, a roundtable of group insurance
industry stakeholders came up with a number of ways to enhance Australians’
insurance coverage through group risk products. Reducing hassle and turn-around
times for both making an application and receiving payment on a claim were two
key suggestions, with delays at the doctors’ end of things pinpointed as an
oft-overlooked area for improvement. The creation of more tailored and relevant
products was also touted, as was a major education campaign to go with them.
The Investment & Financial Services Association (IFSA) is already well
advanced on this, writes the Association’s EMMA GRAINGE.

Superannuation funds
and their group risk insurance partners have made great progress in helping
tackle Australia’s
underinsurance problem. But there’s only so far the one size fits all default
approach can go in addressing the issue. On May 1 IFSA will launch a multi-year
education-based consumer campaign aimed at helping Australians understand the
risks they face in life and how to protect themselves against those risks. The
campaign – called Lifewise – recognises that the only way to address Australia’s
chronic underinsurance problem is by boosting consumer engagement.

Research
conducted by IFSA in 2005 raised the profile of underinsurance, a problem the
life insurance industry has been aware of for a while. 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. In
fact, a 2007 Swiss Re research report found Australia ranks 16th in the world
for life insurance density and penetration. And 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”.

Specifically results of the survey showed that: • 50 per cent are
underinsured by $100,000 for life insurance. • 74 per cent are underinsured by $100,000
for TPD. • 45 per cent are underinsured by $1000 a month for income protection.
We’ve com e a lo ng wa y But it’s not all bad news. The super industry in
conjunction with group risk providers has made significant progress tackling
this issue. Over the past three years most super funds have increased their
default level of cover and a number of funds have gone to great lengths to help
their members appreciate the importance of life insurance.

At the same time,
super funds have successfully negotiated better value premiums making
protecting Australian workers easier and more affordable than ever. In its
media release announcing the research findings, the AIST said the increase in
default levels means “in some instances there is a reasonable level of over-insurance
among super fund members, notably among those aged under 32 years with no
dependents”. The research showed that levels of over-insurance varied depending
on the product type with many younger super members having more life insurance than
needed, but far fewer having too much TPD insurance.

Insights such as these are
helping funds and their insurance providers to better tailor the product
structures to variable needs of members. We also know that despite the increase
in default cover, those with large mortgages and dependent children remain
vulnerable if the worst were to happen. This is why many super funds are
looking at age-based or life stagebased increases in the default cover, giving
members the opportunity to opt out if they wish. Looking at default levels of
cover is not a simple process for super funds as they tend to have varying
levels of segmentation data available. Moreover, the global financial crisis
means the industry is now faced with the competing interests of increasing
default cover at a time when the value of super funds has been eroded by poor
investment performance.

But at the same time, the current economic climate has
heightened public attention on financial security with a recent increase in
take up of all forms of life insurance reported by a number of life insurers. In
addition to improving the levels of cover and updating product structures, technological
advancements are making it much easier for individuals to increase levels of
cover within super. For those in good health, some insurers are able to process
applications to increase cover immediately, requiring members to answer only a
small number of straightforward questions.

Online applications,
tele-underwriting, straight through processing and short form processing have
all come a long way in reducing one of the major barriers for consumers: the
application process. But th ere’s still wo rk to do While these developments
are a big leap forward, there’s only so much that can be achieved by increasing
and segmenting default levels. Everyone’s needs are different so there will
always be groups that are not adequately protected, as well as those that are
overinsured.

Encouraging and helping Australians to take an active interest in
understanding their life risks and providing tools to help them make a
conscious, informed choice about protecting themselves must be part of the
solution. The new Lifewise campaign aims to do just that. The long term goal of
Lifewise is for Australians to feel confident in dealing with life insurance
decisions in the same way they do other insurance or financial matters. A
straight-talking website and insurance needs calculator have been developed to
educate the public about the risks they face and how they can reduce them. This
is not a campaign about selling product, or promoting manufacturers, or the
value of advice over going direct.

It’s just about educating Australians about
the role and critical importance of life insurance – and the presence of
insurance within super is a key part of this message. The success of the
Lifewise campaign depends on the support of a wide variety of stakeholders,
which is why we’re engaging the community sector, media, super industry and
other groups. A number of supporters are already on board including community
partners MS Research, Family Relationship Services Australia and Youth Insearch, who
see first hand the social and personal costs of underinsurance.

The website and
calculator are available for super funds and all other stakeholders to support
their own efforts to educate members and clients. Through Lifewise, we hope the
industry will work together to ensure more Australians will be active in
protecting what matters most – their ability to earn an income and maintain
their lifestyle no matter what happens.

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