While superannuation funds are critical to providing life insurance coverage for many Australians, underinsurance is still rife, according to figures from Rice Warner.
Rice Warner's research found underinsurance remains high among more than 70 per cent of Australian life insurance policies held through superannuation funds.
It estimated that the median level of life cover meets about 60 per cent of the basic needs for average households.
This median level will provide just 38 per cent of the amount required to ensure that family members and dependents maintain their standard of living after the death of a parent or partner, Rice Warner said.
"The degree of underinsurance, together with the role of superannuation funds in providing much of the coverage, emphasises why the Government should include the provision of insurance in its planned legislation of the primary and subsidiary objective of superannuation," a statement from Rice Warner said.
"Many fund members will be prevented by death or disablement from working through to retirement age.
"They will not be able to provide for themselves or their families before and after retirement without the supplement of an insurance benefit."
Rice Warner said the situation is worse for total and permanent disability (TPD) and income protection cover, with median cover meeting only 13 per cent of TPD needs and 17 per cent of income protection needs.
Also, only 19 per cent of life insurance and 10 per cent of TPD policies are held through advisers, while 64 per cent of life insurance and 79 per cent of TPD policies are held through groups, according to Rice Warner.
Rice Warner's head of consulting and research, Jenni Baxter, said the high figure for group insurance policies both for life and TPD can be attributed to the fact that most of these policies are given by default.
"If default insurance didn't exist, most holders of such policies would most likely not seek out insurance of their own accord," she said.
"This is partly due to a lack of awareness of their insurance needs and partly because holders of life and TPD insurance policies from advisers generally tend to be from a high net worth demographic."
MLC Life has appointed the former CFO of AMP Bank as its new deputy CFO as it sees a period of “significant change” for the industry ahead. ...
Mayfair 101 founder James Mawhinney has been restrained from a number of activities following a Federal Court ruling. ...
One of Australia’s largest licensees says it is facing a crisis as risk advisers exit the industry, with its annual life insurance new business drop...