From an industry perspective, it’s a consumer gap that threatens our long-term sustainability if left unchecked.
Rising premiums are compounding the problem, making policies less accessible to the very demographic the industry needs to attract. At the same time, cost-of-living pressures are pushing life insurance further down the priority list for young Australians, as is the simple misconception that life insurance doesn’t matter until you’re older.
A common life insurance buy-in point for this demographic in the past was through the major banks when securing a mortgage, a practice mostly phased out after the Australian banking royal commission.
Put it all together, and you have a perfect storm of social and economic factors seeing fewer Millennials and Gen Zs entering the life insurance market at all.
The situation facing Australians under 35
A 2022 report produced by the Financial Services Council found that an estimated 1 million Australians were underinsured for death/TPD and a further 3.4 million for income protection, with under 35-year-olds representing the largest underinsured cohort for both insurance types.
Another report by the Council of Australian Life Insurers (CALI) revealed that in 2024, 68 per cent of Australians were worried cost of living will impact their ability to afford or continue paying for life insurance.
Young people are insuring their houses and their cars, yet overlook their most valuable asset — themselves. From my experience though, it’s not a lack of understanding; young people see the purpose and benefit of life insurance. The reality is that they’re looking for financial advice, but the current system isn’t geared towards them.
Innovating the use of technology in risk advice
One way forward is through innovation. Yet, the industry has been slow to embrace technology that would make it faster and more convenient for younger people to take out life insurance. At the moment, a 25-year-old is going to fill out the same paperwork and answer the same questions as a 55-year-old, when realistically a younger person is going to have much more straightforward life insurance needs and generally they will be a lot healthier.
I think that AI offers some promise in aligning with younger people’s expectations of a smoother transaction. For example, conversational bots could explain cover options in simple terms, helping people better understand their needs. Past implementation attempts haven’t quite hit the mark and the interest just hasn’t been there, until now when we are seeing the practical benefits of AI and machine learning technology play out across a range of industries.
The personal element of advice will remain, as we know that life insurance isn’t like purchasing a single product. Specialist advisers play a pivotal role in personalising the structure of the cover to each customer based on their unique financial lives, however there’s definitely an opportunity as an industry to utilise technology as a tool in bridging the accessibility gap.
The challenges facing specialist risk advisers
Specialist risk advisers are in a unique position of being in high demand, but unable to serve the entire market due to the financial strain created by the 60 per cent industry cap on commissions. Typically, life insurance is cheaper when you are younger and have simpler coverage needs. This is actually a great time for the customer to buy into life insurance, however the cap on commissions means that these lower-cost policies aren’t financially viable for advisers to be spending their time on, as much as they’d genuinely like to.
Specialist risk advisers, like those in the Bombora network, are typically engaging with high net worth individuals with those higher premiums, and complex cases which require expert guidance and support. Taking an industry level view, the specialist risk advice profession is small but mighty at around 600-strong. With Australia’s adult population at over 21 million, it’s clear to see greater support is needed to solve the problem of underinsurance.
Advocating for a collaborative approach to reform
While there are changes to commission we could suggest, such as employing a minimum commission to be paid to the adviser that covers their costs, the path to get there is a lengthy one. A collaborative approach to life insurance advice reform will be absolutely essential.
As a licensee business, Bombora Advice is working with life insurance companies and reinsurance companies to rethink the way we look at group insurance and general advice. While we work closely with our advisers to make the positive changes they can, we think a core aspect of the way forward is to come up with new ways for consumers to access life insurance without going through the more costly personal advice process our advisers offer and doing what we can to help facilitate that.
The government also has a role to play in raising awareness about the risks of going uninsured, while superannuation funds could be more proactive in communicating with members about the cover they already hold. Industry bodies such as CALI and Financial Advisers Australia could also continue to amplify education and outreach with a collaborative approach.
Closing the consumer gap won’t happen overnight. But by combining technology, adviser expertise, and government and industry support, meaningful progress is possible. Without collective reform, the gap will only grow wider — leaving millions of Australians unprotected and advisers stretched beyond capacity.
Niall McConville, managing director, Bombora Advice.
The cut through in all this is using an advice engine that helps all Australians to self assess their life insurance needs then issues an soa : thereafter it hands the implementation over to face to face to ensure policy accuracy is matched. Otivo in Australia does that and yet the 600 strong referred to don’t bother using any meaningful technology ? Weird but true : the gap would close by millions if they did .. self destruct button isn’t what the nation needs / we all need the risk advisers so maybe Bombara could step in and up to help.
Excellent comment. Otivo . . . Will have to look into that one, sounds like a very clever and possible solution. Need more lateral thinking like this. Let’s hope Bombora or someone like them with some clout gets things moving in such a direction. Should I hold my breath? Thanks for the info Ian.