Risk Averse Australians Fuel Potential Boom in New Insurance Premiums: Lifebroker
November 23, 2011 (PRLEAP.COM) Business NewsThe cost of life insurance is much cheaper than the average Australian thinks it is. That's according to a new report released by Swiss Re, which has conducted a comprehensive survey of consumer attitudes.
This so-called "perception gap" comes at a time when over 40 percent of those surveyed indicated that their families would struggle if their primary breadwinner unexpectedly died.
To many potential life insurance clients, there are two primary barriers to purchasing life insurance. One is the perceived cost of insurance and the second is their lack of available funds. Paul Turner, the Head of Client Management at Division Globals says that "comparing the cost of insurance with that of a cup of coffee a day" might help consumers make more informed purchasing decisions. This is especially true since many potential clients are willing to pay more than the current market price for some form of life insurance.
This attitude is prevalent in many other Asian countries including China, India and Taiwan. The perception gap is so widespread that many are calling for the insurance industry to make a concerted effort to educate the public in the greater Pan-Asian area. The total dollar amount of the "mortality gap" is
estimated to be worth a total of $124 billion US in potential insurance premiums.
What exactly is the mortality gap, and how is it calculated? According to the report, Swiss Re believes that the average family should have a policy that covers up to 10 times the amount of the current breadwinner's annual salary. Using these figures the study surveyed the current income and savings levels of families in both the emerging and developed markets in Asia. Surprisingly, the gap was high in both markets due to higher income and the cost of living in the developed markets. In the emerging markets, the gap was fuelled by a large imbalance in the ratio of needed protection versus available savings. This gap is especially high in China and Vietnam, with India, Malaysia and Australia not far behind.
In the case of Australia, many consumers are becoming increasingly risk averse and wish to purchase a product that will protect them in the event of the loss of their household's major provider. Over 56 percent of those Australians between the ages of 20 to 40 who participated in the survey plan to buy life insurance in the next year. In order to make the most of the public appetite for risk protection, insurance providers should first educate themselves on how their industry is perceived. These providers should then attempt to reach out to their market and help Australians realise the benefits of purchasing an affordable life insurance plan.
"The Protection Gap we have identified equates to a massive opportunity for the insurance industry now," Turner continues. In developed markets this translates to an opportunity to sell life insurance products at a cost that is cheaper than what the consumer expects without reducing the total value of premiums that the insurance companies receive. Each geographic region surveyed in the report indicates that insurers have the chance to increase their total premium sales without having to resort to hard-sell tactics.