Australian life insurers are attaching greater value to mortality than disability, a new report by the Financial Services Council (FSC) claims.

“Disability income insurance is a source of loss, whereas life insurance services are profitable,” the FSC-UBS State of the Industry Report says.

“This suggests a greater value attached to mortality over disability, but also likely reflects that disability insurances are a more competitively priced market.”

The report also notes Australian life insurers’ preference for the individual market over group policies.

“As a comparison statistic from a similar market, if we look at US private industry firms with more than 100 employees, 77% are offered life insurance as part of their compensation package, with some 98% of those taking up the offer.”

Despite this, the Australian life insurance industry is still very profitable, with net profit of $3 billion for the year to September 30, up 33.9% on the previous year.

The FSC uses Australian Securities and Investments Commission data from October 2014 to value the life industry at $44 billion.

In a speech in Sydney on Friday, FSC CEO Sally Loane said the life industry plays an important role protecting Australians in the event of death, serious illness and disability.

“The… industry has made significant progress in bedding down various reforms, and legislation has been introduced to Parliament amending the Corporations Act,” she said.

“An industry code of practice will be announced mid-year. These are positive developments that will significantly strengthen consumer confidence in the sector.”

However, Australian Prudential Regulation Authority data shows life insurers generated more revenue from investments than premiums last year.

This is a dramatic change from 2009, when investment income was a small component of annual revenue.

With investment returns falling due to volatile markets, and the prediction many life advisers will leave the industry due to regulatory changes, it will be interesting to see the annual income breakdown for this year.