Martin Fahy (left) and John O’Mahony
According to a report by ASFA and Deloitte, Australia has a lower level of life insurance than several comparable OECD economies despite being insured in a mandatory pension system.
The report found that, using a measure of the volume of life insurance premiums relative to GDP, Australia (1.5%) lags behind the OECD average as well as the United States, the UK and Canada.
New Zealand, which has no group pension insurance, is one of the most underinsured countries in the OECD (0.9% of GDP) on this measure.
The The future of pension insurance The report recommended a better focus on wellness and return to work that could help nearly 83,000 members, which could increase GDP by about $1.9 billion by 2062, while providing these members with better income for life.
Additionally, early intervention and broader access to treatment could potentially reduce welfare and unemployment costs by $224 million per year by 2062.
Deloitte Access Economics partner John O’Mahony said the insurance industry covers nearly 10 million people.
“In 2021, 50,000 people and their families received more than $6 billion in payouts,” he said in a news release on the report.
Low level of opt-ins
The report states that the insurance-by-default approach improves the likelihood that individuals will be insufficiently covered if they suffer an illness or injury.
“If offered on a voluntary basis, pension insurance would drop significantly – membership rates (where it currently operates) are only 18% – partly because of the many traditional reasons for under -insurance (individuals not understanding, calculating or correctly assessing future financial circumstances).
With awareness levels being low, he noted the impact of stapling on super insurance. This issue had been raised by opponents of stapling, including new financial services minister Stephen Jones who noted that workers could be lumped together with unsuitable insurance schemes if they changed jobs.
“Blue-collar workers particularly benefit from the default arrangements: by the nature of their manual and often dangerous working environment, they face higher risks, but evidence from the opt-in currently in place suggests that their participation is lower: only 8% of blue-collar workers. workers would purchase insurance through the superannuation,” the report says.
ASFA CEO Martin Fahy said giving trustees and insurers access to better data will help them improve their offering to their specific member base.