More young and singles taking up financial protection

The third annual TAL Australian Financial Protection Index has just been released, showing a generational shift in appetite for life and related insurance to Generation Y and away from Baby Boomers together with a rise in singles taking up coverage.

Overall, the 2015 national index score remained relatively steady from last year, dropping slightly from 33.5 to 31.6, but there have been swings in some of the key demographic groups.

A key takeout is the 2015 index shows younger groups aged 18-24 and 25-34 (collectively Gen Y) are increasingly improving their financial protection* scores, while older generations’ index scores are decreasing. 

TAL Group CEO Jim Minto said: “One factor that may be relevant to the higher index scores among younger people is that these younger people entered the workforce at a time when post-GFC worries still permeate our culture.”

“It may be that, in a more risk sensitive climate, they are looking to various life insurance options that can support them across various personal risk situations so that they can continue paying their debts and plans and dreams for the future.”

Single person households also increased their scores, which may also be a reflection of concerns about the economy and the potential impact of not being able to work and earn an income due to unforeseen health related circumstances.

“With single person households on the rise, we may well continue to see an upward trend in this group recognising the value they see in life insurance to protect them. They may perhaps be increasingly aware that they only have themselves to rely on and losing their job or experiencing injury will have a huge impact on rent, mortgage repayments and other commitments,” Mr Minto said.

Those with a score of zero – meaning they hold no form of financial protection including life, disability, critical illness cover and income protection insurance and acknowledge they are at risk – remained relatively steady with 2014 levels and encouragingly they continue to make up a much lower score than the inaugural 2012 index.

“Increased uptake of life protection among younger generations is heartening. However, the fact remains that the overall index score overall nationally is still very low reflecting that most people do not have enough insurance to cover their needs,” Mr Minto said.

Despite the gains among younger people, the 2015 index tells us that many Australians are either not fully understanding the benefits of life-related insurances or, if they do understand it, they aren’t taking the next step to get the full amount of protection they need.

Risk takers, high income earners, home owners and those with children had higher than average index scores score, most likely because of their increased awareness of the wide-reaching ramifications of loss of income due to illness, injury or death.

Mr Minto said: “Clearly we still have a way to go before Australians understand that life insurance is a highly effective way of protecting assets such as the family home, covering other debts – including credit card debt – as well as safeguarding aspirations such as lifestyle and extra supports for children including education.”

“Financial protection has an integral role to play in the life of virtually every Australian but as a nation we have much work to do to better inform people and close the protection gap.”

The Index measures perceptions of insurances held and its adequacy. It is modelled to calculate a score from 0 to 100, where 100 indicates that households have each of the four forms of life insurance (life, illness, disability and income protection insurance) and believe they have adequate coverage if they couldn’t work again due to illness or accident.

Table 1: Financial Protection Index by age

Table 2: Summary of other key demographic findings

Notes

1. Below attached is an Infographic of the key 2015 findings.
2. This survey was undertaken online by Galaxy Research with 1,266 Australians, from the ages of 18–69 years old. Age, gender and region quotas were applied to the same and the dataset was weighted to national proportions.
3. The model didn’t require stay at home parents, the retired and those over 65 to have income protection insurance.
4. *Definition of the four main forms of life insurance (or financial protection): Life – lump sum upon death; Illness – lump sum for defined illnesses; Disability – lump sum upon permanent and total disability; and Income Protection Insurance – regular income payment upon defined illness/disability.

Further information:

Stuart Snell 02 9448 9879/0417 921 235 stuart.snell@tal.com.au 

About TAL: The specialist voice of life insurance in Australia

TAL is Australia’s largest life insurance company with leading competitive offerings in each of its core distribution channels: direct to customers; through financial advisers; and via group and workplace superannuation schemes. With in-force premiums of $2.2 billion, TAL provides more life insurance solutions to Australians than any other insurer. TAL is owned by The Dai-ichi Life Insurance Company, Limited, one of the world’s largest life insurers.