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Under-insurance costing nation $340 million per year
The average level of disability insurance is just over 50 per cent of the required total amount, with high levels of under-insurance evident among much of the Australian working population.
Research conducted by KPMG for the Financial Services Council found the average level of under-insurance was at 55 per cent of the total level of adequate insurance for those 44 per cent of Australians engaged in regular employment.
The figures were higher for those aged 45 to 64, with levels of under-insurance between 74 to 83 per cent of their total level of adequate insurance ,while 35 per cent of employed Australians did not have any form of disability insurance through any source.
Across the entire workforce sector covered by the research, KPMG stated that the level of under-insurance was $304 billion or 63 per cent of the adequate insurance need not being met through existing insurance.
KPMG stated that the actual level of disability insurance was $180 billion, falling far short of the required $485 billion required for adequate levels of disability insurance for Australians aged 18-64.
The high levels of under-insurance was raising the cost of social security benefits and disability support pensions. KPMG said that higher levels of cover and post-disablement income would reduce the burden on the disability support pension. Currently disability support pensions rank as the third largest social security benefit category behind the age pensions and assistance to families with children.
KPMG estimates that with adequate levels of disability insurance, $340 million could be saved in a single year and $2.5 billion over 10 years.
The research data was collected from the Australian Prudential Regulatory Authority and life insurance companies covering insurance through superannuation funds, employer sponsored schemes and individual policies, with the numbers presented as an aggregate.
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