Underinsurance in the life insurance market is now estimated to be $1.37 trillion, according to Metlife CEO Marc Lieberman.

Speaking at the Financial Services Conference in Melbourne last week, he said 50% of the population have their life policies underinsured by $100,000.

“Some people have cover in their superannuation fund, but this often is inadequate,” he said.

“With TPD cover, 74% of people are underinsured by $100,000 and 45% of people with income protection insurance are underinsured by $1000 a month.”

Mr Lieberman says only 4% of Australians have adequate insurance. The problem has grown since the global financial crisis as revenues from insurance have fallen from $20 billion in September 2007 to about $5 billion now.

“The global financial crisis was a fast-moving tsunami which none of us saw, but this is now a wake-up call for the industry,” Mr Lieberman said. “We will have a stronger industry going forward, but we have to address some issues first.”

One of those issues is transparency, with the industry needing to create clearer products that are understood by consumers.

“It is often difficult for consumers to understand insurance and we should be looking at whether people understand what we are trying to sell them,” he said.

Mr Lieberman says advisers, superannuation funds and insurers need to educate consumers.

“We need to get people to make informed decisions on insurance through education.”