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Financial Strain Forces Australians to Reevaluate Life Insurance

Financial Strain Forces Australians to Reevaluate Life Insurance

Financial Strain Forces Australians to Reevaluate Life Insurance?w=400
The rising cost of living is compelling Australians to view life insurance less as a safeguarding asset and more as an unnecessary liability.
This trend emerges amidst a confluence of economic challenges including escalating inflation, increasing interest rates, and notable shifts in population demographics, according to David Sarkis, the CEO of iExtend.

Amid relentless premium increases, Australians are increasingly seeking the counsel of financial advisers to reassess the worth of their life insurance policies. Decisions hang in the balance as many contemplate whether to uphold, amend, or abandon their current coverage.

A survey conducted by the Council of Australian Life Insurers (CALI) titled "The State of Australia’s Safety Net," highlights that nearly a quarter of the 5,000 adults surveyed would consider policy cancellation should their financial circumstances deteriorate. Moreover, 68 percent expressed anxiety over their continued ability to afford life insurance given the ongoing economic pressures.

David Sarkis underlined this shift, stating, "As a result of a range of financial and demographic pressures, we have seen more Australians change their view of their life insurance and are seeking to cancel it." The burdens of everyday expenses are driving households to contemplate policy cancellation as a means to ease the immediate financial strain.

Research by iExtend points out seven pivotal reasons behind the trend of policy cancellations:

  1. Premium Inflation: Life insurance premiums in advanced economies are projected to climb by 1.5% in 2025, with more pronounced increases anticipated in emerging markets. This trend saps confidence in maintaining long-term life insurance commitments.
  2. Health Challenges: With 39% of the Australian workforce afflicted by chronic conditions, health changes are steering decisions around life insurance policy cancellation, as indicated by iExtend's criteria.
  3. Ageing Society: Predictions suggest that by 2066, individuals over 65 will represent up to 23% of Australia's population, elevating the importance of estate planning and related insurance considerations.
  4. Cost-of-Living Escalation: The Consumer Price Index saw a 2.3% increase over the year leading to November 2024, pressuring Australians to trim discretionary spending, including life insurance.
  5. Intergenerational Wealth Shift: The Productivity Commission reports an estimated $3.5 trillion in assets will transfer across generations by 2050, influencing decisions surrounding life insurance and estate plans.
  6. Real Estate and Business Sales: Economic pressures compel Australians to offload property despite market conditions, pushing life insurance into the realm of valuable long-term assets.
  7. Advice Accessibility: With just 15,400 financial advisers available nationwide, obtaining professional advice remains challenging, influencing uninformed insurance decisions.

Sarkis concludes by indicating iExtend’s commitment: "We are working with advisers and their clients to ensure they make informed choices about the future of their life insurance policies, decisions which impact families and generations of Australians."

These insights are adapted from a report originally published by Yasmine Raso on CALI's findings and expert opinions in the life insurance sector.

Published:Thursday, 30th Jan 2025
Source: Paige Estritori

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