Australian life insurers lag global peers: Capgemini

A new survey from Capgemini found that Australian life insurers are stowed behind the global average when it comes to member engagement and educational efforts.

According to Capgemini's The World Life Insurance Report 2027, which is based on a global survey of 6100 consumers worldwide, including 425 in Australia, life insurers are grappling with onboarding and retaining customers.

This is reflected by the use of technical language (37%), affordability concerns (35%), and the lack of relevant products to individuals' life stage (25%) among top barriers to purchasing a policy.

The report also indicated that half of consumers plan to use generative artificial intelligence (AI) tools to discover and compare life insurance products.

Further, 36% of policyholders rarely hear from their life insurer after purchasing a policy. However, domestically that number increased to 41%, indicating an underlying issue in how Australian insurers approach member engagement. The majority of the contact (76%) was only conducted for billing and renewals.

Close to half (47%) considering taking out a policy are either "confused or unconvinced" by life insurance, compared to 42% globally.

Forty-two percent of Australians discontinue their policy within three years of purchase, with nearly one in three (27%) doing so due to the lack of understanding of benefits and liquidity options as key reasons.

In contrast, more Australian employees receive adequate coverage guidance than the global average, (34% in Australia versus 25% globally), the report noted.

Capgemini global leader for life insurance, annuities and benefits sector Samantha Chow said consumers have high standards for their personal financial services products and life insurers need to do better to accommodate to those needs.

"When it comes to life insurance, they recognise its importance, but complexity at the point of purchase and post-sale silence undermine policy ownership - putting customer relationships at risk and triggering exits that cost the industry billions," Chow said.

"Best-in-class insurers demonstrate what's possible when consumers sit at the heart of every decision. They build the data foundations to turn customer intelligence into proactive, lifelong engagement that has a real commercial impact."

Yet, the report said only 18% of insurers have a unified strategy, underscoring the need for a plan to address those relevance gaps, while 'best-in-class insurers' - representing only 10% of all carriers - have set a clear standard.

They also achieve 41% higher revenue growth and 12% lower lapse rates by combining consumer-led strategies with intelligence-powered operations.

In practice, they distinguish themselves against mainstream peers by transforming consumer engagement, including the usage of simple, plain language and providing short-form contents.

Those high-performing insurers are also modernising adviser experiences by improving structures, workflows and implementing real-time insights to boost efficiencies.

"The top 10% are orchestrating an ecosystem of advisers, partners, and AI-enabled channels to create a consistent journey between automated and human touchpoints," Chow added.