Expect consumers to pull out of advised policies and other financial services as a result of the COVID crisis, Labor senator Deborah O’Neill has said.
Speaking in a Financial Services Council (FSC) webinar, Ms O’Neill cautioned the expected rise in unemployment will see Australians withdraw from direct and advised insurance.
As outlined in the federal budget, unemployment is expected to peak at 8 per cent this year.
“We’re going to have hundreds of thousands more people unemployed before Christmas,” Ms O’Neill said.
“We’ve got a million people unemployed who weren’t unemployed. We’ve got a timeline, with a clock ticking for the reduction of JobKeeper, which has been so important for helping people stay in their home, which is pretty important for their mental health, and pay their bills and get through and keep their business going.”
The Labor senator also commented that the government has not accounted for what might need to be different in Victoria. Meanwhile, JobSeeker is set to be wound back to its old payments, equalling around $40 a day.
“That is a whole other world of pain on the horizon that is not going to be pretty for this country, mental health impacts will be profound,” Ms O’Neill said.
“People who are in a direct insurance or in advised insurance will be withdrawing. They will be withdrawing, they will not be able to maintain the good financial health practices that they have engaged in.”
She also expressed concern that the majority of superannuation members accessing their retirement savings under the early release scheme have been women, who now have no group insurance as a result.
Nick Kirwan, senior policy manager, life insurance at the FSC, said, “Australia already has an underinsurance issue, that begs the question what more can we do to address that?”
“In my view, we shouldn’t have taken more people out of group insurance,” the senator answered, referring to the changes under Protecting Your Super legislation. New super members aged under 25 are now not provided with insurance unless they request it or work in a dangerous job.
“Once it’s established and people are in there, there was some protection in group insurance,” Ms O’Neill said.
“And I know the finer details, 12 per cent were rejected by comparison to retail and direct, yes those things matter. But, structurally, what we’ve done is reduce the pool of people who are in there and we are in the cusp of another massive reduction, as people have to tighten their belts, as we experience the first recession in 30 years...
“We will have … people, as of March next year, if the government doesn’t make any changes, trying to live on $40 a day. That kind of disruption will make the technical changes that have been challenging this sector [life insurance] pale into insignificance.”
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