Reviving Australia's Troubled Insurance Industry: Opportunities and Challenges

Australia's retail life insurance sector is facing significant challenges despite generating approximately $9.4 billion in annual premiums.

Upon closer examination, it's evident that this industry is under strain.

Growth is primarily driven by price increases rather than the addition of new clients, signalling concerns for long-term sustainability.

New business growth hovers around 8-9% annually, not enough to adequately bolster the sector.

This situation is troublesome, especially given Australia's notable issues with underinsurance, highlighted by figures from NMG Consulting showing over 20% of Australians aged over 35 are underinsured.

The insurance industry is grappling with dwindling adviser numbers, rising claims, and the burden of maintaining sustainable products like individual disability income insurance (IDII) and total and permanent disability (TPD) cover. However, there are positive signs and opportunities for improvement, notes Kieran Forde from Zurich Australia. Although new business volumes for this year are projected to hit $340 million, the industry needs further growth to secure its future. Recognising the increased need for life insurance in an environment of rising incomes and living costs presents opportunities for advisers who do not traditionally provide risk advice.

Currently, one-third of Australia's approximately 15,550 registered financial advisers offer risk advice, with a small fraction of these generating substantial new business. Forde notes that regulatory stability has allowed advisers to refocus and enhance their efficiency. He is optimistic about proposed reforms, such as the government’s Delivering Better Financial Outcomes (DBFO) initiative, potentially creating a new category of advisers to provide affordable, targeted advice. This initiative could encourage life insurers and advice licensees to hire such advisers, addressing the advice gap by offering scoped recommendations on life insurance products.

Despite current operational challenges, Katherine Hayes from Hayes and Co Insurance Services views the market as favourable for risk specialists. While the industry faces systemic issues, such as regulatory pressures leading to adviser attrition, the potential introduction of a new class of advisers could rejuvenate the industry. This proposal could channel fresh talent into the sector, with some aspiring to become full-service advisers. Hayes emphasises the need for clear boundaries to delineate the roles of new advisers and existing specialists.

Key to revitalising the sector is the strategic employment and training of new advisers by life insurance companies. These professionals could complement existing advisers rather than compete, focusing on simpler, product-based advice. This approach encourages collaboration between insurers and financial advisers, ensuring Australians receive adequate life insurance coverage while creating pathways for future specialist advisers. Such partnerships could prove integral in navigating the complexity of advice and removing barriers to adequate insurance for consumers.

Published:Wednesday, 30th Jul 2025
Source: Paige Estritori

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