The outlook for Australia’s life insurance sector is improving due to the level of underinsurance among the population, according to a report released by analysts Moody’s.

However, the Moody’s report into the life insurance industry does concede that regulatory and competitive challenges still remain an issue for life insurers.

The report says AMP, National Australia/MLC and Colonial/CBA need to market their investment and insurance capabilities to differentiate themselves from the smaller, non-life competitors who have done well in the super and investment businesses.

Hong Kong-based Assistant Vice President at Moody’s Investors Service, Donovan North, says Australians are underinsured in the area of term insurance, which would protect an individual’s dependents in the event of a death.

He told Sunrise Exchange News the situation may have arisen from changes in the market, which has seen the “unbundling of insurance products into separate protection and investment options, with a greater focus on the latter”.  

Mr North says the factor of an ageing population will further contribute towards growth prospects for risk insurance. Australians will become more aware of the need to protect their financial security, especially given their growing exposure to the property market and increasing household debt. 

“This market may be smaller than the superannuation and funds management areas, but it is important for life insurers and is not expected to see the pricing pressure evident in wealth management,” he said.