MetLife has released its annual state-of-the-industry report, covering key areas including under-insurance, regulatory reforms and financial advisers.

The 2022 Value of Life Insurance Report says Covid-19 and other global changes have brought about a new economic reality in Australia, reinforcing the need for Australians to have life insurance.

“Worryingly, however and perhaps reflecting these financial pressures, studies show that only car, home and contents, and to a lesser degree private health insurance, are now seen as essential by Australians,” the report says.

“This is consistent with findings elsewhere in this report, and with a trend identified in the 2021 Value of Life Insurance Report, wherein we noted that the number of Australians purchasing life insurance had dropped since 2018, citing its perceived high cost.”

The report says increasing economic pressures will widen the insurance coverage gap, especially among vulnerable Australians, unless action is taken.

Young women and those receiving disability payments are highly vulnerable to financial instability and may be most at risk from a lack of appropriate insurance coverage, according to the report.

The report says in recent years the underinsurance gap has continued to widen. Since June 2018, the insurance sector has seen an overall reduction in sum insured of 17% and 19% for death and total and permanent disability (TPD) cover respectively.

The decline is driven mostly by the drop in group insurance inside superannuation, being 27% for death cover and 29% for TPD cover.

“There is an opportunity to raise awareness of underinsurance, assist people in understanding their need for adequate protection, and provide appropriate resources to help them understand their needs,” the report says.

Superannuation is one of the primary ways Australians receive access to life insurance and while there are relatively high levels of awareness around the existence of insurance inside super, many don’t know fundamental details about their insurance, including how much they are covered for, how much they need or that their default insurance can be adjusted to meet their needs.

“This lack of engagement means many may not have sufficient protection to cover living expenses or provide for their families, should they suffer a significant illness, injury or death,” the report says.

“This is a major cause of underinsurance in Australia.”

MetLife says financial advisers play a critical role in supporting the financial wellbeing of Australians.

“We see advisers as key players in the financial services ecosystem – and will continue advocating on their behalf – to ensure ordinary Australians have access to sound financial advice to help them build a confident future,” the report says.

“This comes at a time when the need for financial advice has never been greater.”

The report says legislative change has and will continue to apply pressure to the industry, as participants work through the implications of recent changes.

“With no new major legislative change currently on the horizon, however, it appears the industry will be able to shift focus from implementation to innovation and transformation,” the report says.

“This is timely, as customer expectations around seamless, easy and fast digital experiences, means that life insurers need to begin transforming.”

Click here for more from the report.