According to recent figures from actuaries/ researchers Plan For Life, total premiums of $7.19 billion flowed into Australia’s risk market in the year to December 31, 2008, with $2.17 billion (or 30.2 per cent) coming from the total group risk market, incorporating death, TPD and income protection cover.
This represents steady, if modest growth in group risk’s share of the total pie from 28.8 per cent in 2006. The head of underwriting at MLC, Tracey Crowe, is one of many who thinks this gap will continue to close. “There’s a huge underinsurance problem in Australia and a lot of that is to do with the complexity of the process.
The more complex your product, the more expensive it’s going to be. For many Australians insurance through their superannuation fund can be a simpler product that meets their needs,” she says. Spurred on by the boom times, however, the average group insurance offer has also considerably closed the gap on its retail counterpart in recent times.
As Matthew Plenty, the national business development manager for Comminsure, observes, “gone are the days when a fund only wanted to spend a dollar per member per week for a scale that provided the most cover to a 17 year old and not much cover at all to a 50 year old…in the last 12 months we’ve seen big strides to funds actually addressing the default cover level by doubling it, or changing the shape of the fund’s scale to address more needsbased insurance.”
As partisan an observer as Vicki Doyle, the general manager of super and investments at Suncorp, is seeing group insurance as a potential solution to Australia’s underinsurance problem, rather than a cause of it. “Unless you’re really wealthy or you have complex needs around a business, for example, then I’d say group insurance is generally a suitable product to cover people through to retirement,” she says.
The virtual waiting room
This air of confidence around group insurance masks a harsh reality. The take-up of group insurance units beyond the default, which in most cases represents an underinsured level, is still extremely low, and insurers can’t be certain just how many would-be applicants drop out along the way. At a recent roundtable hosted by Investment & Technology in conjunction with Comminsure, one of the insurer’s business development managers, John Mok, estimated that only 2 to 5 per cent of its total group membership – which in 2008 paid premiums of $433.3 million – took advantage of additional coverage beyond the default offered to them.
