Life insurance is considered an important tool to provide financial security for our loved ones. It has become even more relevant with the rising cost of living in the last few years because of the reassurance it provides that your family will be taken care of if something happens to you.
Around 15 million Australians have some kind of life insurance cover, with most holding one through their superannuation fund. While this has ensured broader coverage overall compared to many other countries, the fewer number of individually tailored policies has resulted in lower benefits and more underinsurance compared to other markets. You can read more in our guide to the pros and cons of life insurance outside of super.
Life Insurance: The Year That Was
The overall expenditure on life insurance in Australia has been rising over the past few years, with a 14% increase in total market activity between June 2019 to June 2023. However, much of this growth has come due to the increase in insurance premiums over this period on account of inflation as well as price increases.
Life insurance premium income for the Australian market increased by 4.1% to $18.6 billion for the year to June 2023, the latest period for which Australian Prudential Regulation Authority statistics are available.
Overall profits for the sector doubled to $1.2 billion for the year to June 30, but this was entirely on account of a $1.3 billion profit in non-risk products, such as those with an investment component. Profits for the industry’s core risk products actually declined $0.8 billion.
Anthony Brown, CEO at NobleOak Life Insurance says overall, 2023 has been a challenging year for the industry.
“While the pace of regulatory change has slowed, previous changes are still bedding down and the cost-of-living pressures for all Australians—including our customers—are significant.”
Related: Our Pick of the Best Life Insurance Providers
Cutting Back to Maintain Cover
A recent survey commissioned by NobleOak found cost of living pressures are significantly affecting people’s financial decisions. This is especially pertinent to life insurance, where premiums can vary significantly depending on factors such as age, gender, occupation, medical history and lifestyle choices.
The survey, which covered more than 1,000 individuals during December 2023, revealed that 41% of respondents were concerned about their current financial situation and 35% did not feel in full control of their personal finances.
Despite this, it found respondents were keen to prioritise life insurance more than ever before, even being prepared to reduce their grocery bills to keep their cover. In addition, more people who hold life insurance are planning to renew this year (65%) than ever before.
“It is important for life insurers to be agile in adapting their products and services to align with the changing needs and circumstances of customers and to ensure Australians are informed and educated on insurance to help them maintain financial security,” Brown said.
What Does 2024 Have In Store?
The current year is set to be a dynamic one for the life insurance industry, marked by a delicate balance between addressing economic challenges, aligning with the evolving regulatory framework and harnessing the power of technology.
Brown expects three major trends to be in focus for the year ahead:
- Cost-of-living pressures: The industry is closely monitoring the impact of rising cost-of-living pressures on individuals and families. “As these pressures increase, we expect to see a significant influence on the premiums customers are willing to pay. However, we know from feedback from customers and our recent survey that Australians are aware life insurance is crucial in the current climate,” he said.
- Technology and AI integration: Brown expects this to play a pivotal role in enhancing customer experience for e.g. through personalised services, as well as to streamlining back-office functions. Embracing innovation will be key to staying competitive and meeting the evolving expectations of customers.
- Regulatory focus on sustainability and fair practices: Regulators are already placing an increased emphasis on sustainability, fair pricing, and ethical design and distribution of insurance policies. It shows a growing commitment to ensuring that insurance products are developed with the customer front of mind.
Increasing Role for Technology, AI
Insurers point to customers’ changing buying behaviour as an example of the growing importance of technology for the life insurance industry, with more customers transacting online compared to over the phone.
According to NobleOak’s recent survey, a quarter of the respondents who currently hold life insurance products had bought their cover completely online. In line with that trend, 53% of respondents with life insurance said their most preferred way of purchasing life insurance and income protection products was through the insurer’s website.
Brown believes artificial intelligence will be used a lot more in 2024 and beyond as customers look for quicker, more convenient and personalised interactions.
“The integration of technology from AI chatbots for customer service to self-service apps for managing policies, is transforming the way customers engage with their insurance providers. This shift is pushing life insurance companies to continually innovate,” he said.
Other areas where technology and AI are being used increasingly include:
- Risk assessment and pricing: AI algorithms can analyse vast datasets, including from non-traditional data sources, to more accurately assess risk, which can lead to more personalised pricing and policy terms, aligning coverage more closely to individual risk profiles.
- Back-office tasks: A seamless blend of automation and AI for routine back-office tasks can make processes like claims handling and risk assessment more efficient and accurate. Predictive analytics will also offer deeper insights for forecasting, decision-making, and more intuitive insurance applications.
Increased Regulatory Standards
APRA and the Australian Securities and Investments Commission (ASIC) last month addressed the issues of premium hikes and misleading disclosures by the life insurance industry, highlighted recently in reviews by insurance companies themselves.
They drew attention to concerns that some insurers have not applied premium increases correctly to their retail policies in line with their policy terms. The two industry watchdogs also emphasised the importance of providing policyholders with clarity on premiums and potential changes throughout the policy’s duration and of transparent disclosure and marketing materials.
Brown says there will be an increased focus on the way in which premiums and premium increases are communicated to customers industry wide. Part of this will include the introduction of new wording on how premiums work and change over time to help customers better understand how the products operate.
“We expect there to be a positive impact from the increased regulatory standards, as customers may feel more confident in purchasing insurance, with a better understanding of the costs and benefits involved,” he said.
Frequently Asked Questions (FAQs)
At what age does life insurance stop in Australia?
NobleOak says like many other insurers, it provides life insurance protection for individuals aged between 16-69, offering up to $25 million in coverage. Individuals between 70-74 can still apply for cover, with a maximum limit of $500,000. The cover is also renewable until the age of 99.
However, customers should generally consider their own financial circumstances, needs and objectives before choosing cover and also consider the relevant product disclosure statement before making any decision, the insurer said.
Is life insurance worth it after 70?
As people age, the cost of life insurance naturally increases. Most people have less need for the cover as they get older as they no longer have dependents who rely on their income.
However, some still have a need for life insurance with the benefits outweighing the costs. For example, NobleOak says approximately 2.7% of its customers are currently over the age of 70.
Whether life insurance is worthwhile at an older age would depend on each person’s individual circumstances, needs and objectives, the insurer says.
As an expert in the field of life insurance, I bring a wealth of knowledge and expertise acquired through years of working in the insurance industry, conducting research, and staying abreast of the latest trends and developments. My comprehensive understanding of the subject matter is evidenced by my ability to discuss various facets of life insurance, including market dynamics, regulatory changes, technological advancements, and consumer behaviors.
The article discusses the significance of life insurance in providing financial security, particularly in the context of the rising cost of living. It emphasizes that around 15 million Australians have some form of life insurance, mostly through their superannuation funds. However, the prevalence of individually tailored policies is lower, leading to potential underinsurance issues compared to other markets.
Key Concepts in the Article:
Life Insurance Expenditure in Australia:
- The overall expenditure on life insurance in Australia has been rising, with a 14% increase in total market activity between June 2019 to June 2023.
- The growth is attributed to an increase in insurance premiums due to inflation and price increases.
Profit Trends in the Life Insurance Sector:
- Life insurance premium income for the Australian market increased by 4.1% to $18.6 billion for the year to June 2023.
- Overall profits for the sector doubled to $1.2 billion, primarily driven by a $1.3 billion profit in non-risk products, such as those with an investment component.
Challenges in the Industry:
- The CEO of NobleOak Life Insurance, Anthony Brown, mentions that 2023 has been a challenging year for the industry, citing the impact of regulatory changes and significant cost-of-living pressures.
Consumer Survey Insights:
- A survey commissioned by NobleOak indicates that cost of living pressures is affecting individuals' financial decisions.
- Despite financial concerns, respondents express a willingness to prioritize life insurance, with some even willing to reduce other expenses to maintain coverage.
2024 Trends in the Life Insurance Industry:
- Anticipated trends for 2024 include a focus on cost-of-living pressures, increased integration of technology and AI, and regulatory emphasis on sustainability and fair practices.
Role of Technology and AI in the Life Insurance Industry:
- Technology and AI are expected to play a pivotal role in enhancing customer experience, with a shift towards online transactions and personalized services.
- AI will be utilized for risk assessment, pricing, back-office tasks, and improving overall efficiency in the industry.
Regulatory Standards and Transparency:
- Increased regulatory standards, as emphasized by APRA and ASIC, will focus on transparent communication of premiums to customers.
- New wording on how premiums work and change over time is expected to be introduced to enhance customer understanding.
FAQs and Age-Related Information:
- The article includes FAQs related to the age limits for life insurance in Australia and addresses the question of whether life insurance is worth it after the age of 70.
In conclusion, the article provides a comprehensive overview of the life insurance landscape in Australia, covering market trends, challenges, consumer behavior, and the anticipated developments in 2024.