Income protection insurance should be presented as part of personal finances and Governments should be pressuring insurers to provide transparent and easy to understand products, a new global study into income protection under-insurance has stated.
Zurich Life and Investments Australia, CEO, Tim Bailey
The study, conducted by Zurich Insurance Group and the Smith School of Enterprise and the Environment, University of Oxford, examined gaps in income protection (IP) insurance in 12 countries, including Australia, and found that Government, insurers, employers and intermediaries had a role in promoting IP cover to consumers.
The study examined what measures were available to each group to close the current gaps in income protection cover and stated “Governments could play a useful role here by putting pressure on the financial industry to create and promote income protection products that are transparent and easy for consumers to understand.”
Additionally, the study also stated that life insurers could also contribute and “…these need to get better at explaining to consumers the benefits of income protection”.
“Insurers can also help by making financial planning relevant to households…”
“Insurers can also help by making financial planning relevant to households, for example, by presenting income protection within the context of overall household finances,” the study stated.
Addressing the area of employer actions, the study suggested enrolling people in income protection insurance programs automatically and then ensuring they made regular contributions to cover the cost as one possible solution, combined with formal financial education and personalised advice that integrated goal-setting.
Zurich said the findings of the study show the need for urgent solutions particularly where extended working lives were putting individuals at increased risk of becoming disabled during their career.
Commenting on the findings Zurich Australia Life and Investments Chief Executive, Tim Bailey said, “Our research shows that several factors are aggregating to put the financial security of many Australians at risk as they age. Unfortunately, this is at a time when governments in developed nations are generally spending less on welfare benefits in response to the increasing cost of an ageing population. This presents a real challenge to society. We all need to act to foster and implement solutions”.
“Inadequate and/or inappropriate life insurance cover could expose Australian families to the serious risk of depleted household budgets, and the erosion of savings accounts and retirement balances. The burden of guaranteeing long-term financial security is simply too great for many individuals to bear,” he added.
November 17, 2017