News Business30 Aug 2004

Asia:Australia Lagging Behind Others On Life Cover - sigma

30 Aug 2004

A survey commissioned by insurance group Swiss Re has found Australia lagging the US, UK, Germany, Italy and Taiwan in the provision of term life cover for the average worker with dependants, putting this down partly to the declining population of whole life and endowment policies.

The sigma report on global mortality protection identified Australia as having the largest income protection gap of 39% compared with several developed countries, suggesting that Australians need to raise their annual term premiums by 109% or US$250 per primary household earner with dependents.Failure to rectify the shortfall in the basic financial needs of many families could leave them vulnerable to a drastic fall in living standards in the event of the household primary earner's demise.The findings are noteworthy, coming amidst an improving individual term insurance market which saw growth of 9.8% from 1998 to 2002, driven by a shift in Australian's preference for purchasing mortality protection separate from investment.But as sigma noted in its report: "The shift resulted from the declining popularity of whole life and endowment products because of concerns about their inflexibility, lack of transparency and poor investment returns."On a more positive note, the study found that term markets in other countries have grown in recent years. The survey noted that term prices have dropped significantly due to mortality improvements and competitive market forces, but added that the rate of expansion varied vastly from country to country, depending on size and degree of product development.
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