The underinsurance crisis is set to deepen as household spending plummets under the pressure of a slowing economy and the federal budget, a financial services academic warns.

Deakin University financial planning and super lecturer Adrian Raftery predicts insurance will be one of the first casualties as consumers cut discretionary spending, with life cover taking the biggest hit. 

“While life insurance is a necessity, sadly most view it as a luxury item and will cancel it, or let it lapse, at first opportunity when cashflow gets tight.”

The Australian Bureau of Statistics estimates the lives of working Australians are uninsured by up to $800 billion.

The budget – still subject to passage through the Senate – contains many unpopular cuts to concessions such as family tax benefit part B and the dependent spouse and mature-age tax offsets, plus the introduction of the budget deficit levy and a $7 “co-payment” to visit GPs.