Life insurance claims paid out billions of dollars to Australians last year. However, the industry needs to focus on creating awareness for its members as it is faced with negative sentiment, specifically around group insurance, the FSC Life Insurance Summit has heard.
KPMG, on behalf of the Financial Services Council (FSC), revealed there was more than $12 billion in claims paid to more than 100,000 Australians during 2019.
FSC senior policy manager Nick Kirwan said: "Life insurance companies pay out almost $33 million to 279 Australians and their families every single day, 365 days a year. Payments are made to people who have lost a partner, a parent or a loved one, or to help people support themselves and their family when they are too ill to work, after a critical illness or who are not expected to be able to work ever again."
Speaking at the event, First State Super's head of insurance David Evans said the industry needs to focus on maintaining cover for members at an affordable cost and building awareness so that members value their cover.
|Sponsored by Insight Investment|
Towards a perfect currency solution
"There is a lot of negative sentiment around life insurance in super. This is undermining member confidence and that is leading members to choose to opt out when it's not in their best interest," Evans said.
For death cover there were 13.4 million covers in force, 97% of lodged claims were paid with the highest cause of claim was cancer at 43%.
For total and permanent disability there were 11.1 million covers, 90% of lodged claims were paid and the highest cause of claim was mental health at 25%.
For income protection/disability income there were 5.8 million covers in force, 95% of lodged claims were paid and the highest cause of claim was accidents at 33%.
MetLife's chief strategy and data officer Gerard McDermott said life insurance data is critical to the perceived value of insurance.
"Data can play a really important role in optimising claims and providing data to improve the experience and return to health outcomes," McDermott said.
Evans agreed: "The data would suggest there are of good value for super members but form a perceived value is comes down to awareness and members not knowing they have cover and the confidence members have in their cover."
"We need to start to recognise the traditional group model is being diluted. It's historically been universal cover for all and everyone contributes but not everyone claims."
Evans explained the Protecting Your Super and Putting Members' Interests First measures gave members an opportunity to make an active decision whether or not to retain their fund life insurance.
"At First State Super we have strong opt-in rates and activity to retain insurance. There is a large cohort of the membership that does value the insurance. However, we have found that around 50% of members probably disengaged or not aware of cover," Evans said.
In particular, the pandemic has been a catalyst for members to check their life insurance and First State Super has seen an increased appetite for members to review cover.
On the other hand, the Early Release of Super scheme (ERS) is causing problems for life insurance cover and is leaving people exposed.
"We have been proactive with members who have been insured as to whether they should do the ERS as they were at risk of losing their cover," Evans said.
QInsure chief executive Phil Fraser said creating awareness of the value of life insurance is the industry's obligation.
"There is a significant amount of protection for when people need it. It's the few that will claim but it is there for many. We need to make sure the future is strong and the value is there for all insured," he said.