The Australian life insurance industry must starting focusing more strongly on customers, AIA Australia CEO Damien Green says.

“For too long the life industry has been focused on its own objectives rather than selling the economic and social benefits of having life insurance,” he told insuranceNEWS.com.au.

“If we are to tackle the recently estimated underinsurance income replacement gap of $3 trillion, we have to do far more to gear our businesses to the needs of the customer and customer service.”

Mr Green says the industry has to engage with customers, government and distributors to tackle the massive ongoing problem of underinsurance.

“Our role is to protect the consumer and that is the message we need to build on,” he said.

“For too long life insurers have focused on product, distribution and their own top-line success, rather than on genuinely growing value for customers and the community.”

Mr Green says the Australian life industry does not face the problems general insurers are facing from the recent spate of natural disasters.

“Life industry performance is generally influenced by economic conditions and the overall mortality rate rather than single events,” he said.

Long-term community mortality rates in Australia and the US have been falling, but have flattened out recently.

“At the same time current economic conditions in Australia, while soft, do increase the opportunity for life insurers as cautious consumer sentiment and increased savings rates lead to a greater focus from households on downside risk protection,” he said.

Mr Green says a reflection of the significant opportunity facing the Australian life industry has been the recent arrival of another major global reinsurer, Scor Global Life.

“The fact all the major life reinsurers are operating in Australia is a good indication that this is an important market,” he said. “Having the major reinsurers here also provides options for direct life insurers when it comes to risk and capital management.

“A wider option of reinsurers locally is also healthy for the local market when it comes to competition and the opportunity to further spread risk.”