It would be no surprise to hear that most Australians don’t have the scale of accumulated savings required to protect them for an extended period of time in the event of a significant life event – i.e. one that prevented them from working for anything but a short period of time.
Insurance products aimed at protecting income or providing a benefit in the event of a traumatic injury or illness, permanent disability or other insurable event, are widely available in Australia – either through superannuation funds or on a retail basis.
Of course, the decision to insure for anything is often an emotional one and, in that context, income protection insurance is often considered a luxury by Australians of working age. It is a fact that most people will choose to insure a discretionary item, or choose a discretionary increase in insurance for a car or house, over taking out some kind of income protection cover. This is despite the fact that an individual’s income is likely to be their most valuable asset.
In recent years and even months, there has also been a suite of damaging press articles about this type of insurance, particularly in the wake of the Hayne Royal Commission.
Society is also changing in quite dramatic ways which influences the way in which insurance products can work. One of the most important composite trends is the combination of low unemployment, high underemployment and stagnant wage growth which our economy has experienced over the last decade or so. In a nutshell, this means that while more people are employed, fewer people are fully employed (working a full suite of hours each week) and most haven’t experienced a real salary increase in quite a few years. Add to this increased casualisation of the workforce, and real increases in general costs (including insurance) and many people are reluctant to look at discretionary spending, which is often extended to choosing to insure.
Many of these pressures, combined with greater societal awareness of mental health, have also led to increased reporting of claims within the insurance market against mental health challenges.
It is a reasonable observation to make that the large scale generic retail insurance market has struggled to adapt to these issues and has focused its efforts on claims assessment and investigation, or premium increases. This is rather than looking at how it can work with each individual’s circumstances to tailor an appropriate insurance package and, in the event of a life changing experience, either working on preventative strategies or rehabilitation strategies as part of the insurance solution.
Ultimately, the large insurance companies will eventually change to address these issues, they usually get there in the end! However the stark reality is that, if you want to look to protect you and your family in the event of an adverse health event, your best option is to engage a bespoke, specialist and expert insurer that will take the time to understand your circumstances and tailor an insurance package that will work best to protect you and those you love.