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Addressing Australia's Life Insurance Underinsurance Crisis: Calls for Regulatory Change

Understanding the Factors Behind the Growing Protection Gap

Addressing Australia's Life Insurance Underinsurance Crisis: Calls for Regulatory Change?w=400

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Australia's life insurance industry is currently grappling with a significant underinsurance gap, described by industry leaders as a 'perfect storm' of challenges.
This situation arises from a combination of social, economic, and regulatory factors that have led to decreased engagement with life insurance products, particularly among younger Australians.

Niall McConville, Managing Director of Bombora Advice, highlighted that both older clients are opting out of existing policies and younger individuals are not securing new coverage. Rising premiums and cost-of-living pressures have made life insurance less accessible to the demographic that the industry most needs to engage.

Data from the Financial Services Council indicates that approximately one million Australians are underinsured for death or TPD cover, with an additional 3.4 million underinsured for income protection. Notably, individuals under 35 constitute the largest proportion of these groups.

McConville pointed out that traditional touchpoints for life insurance, such as banks offering coverage alongside mortgages, have diminished, further reducing younger consumers' engagement with these products. He suggested that leveraging technology and artificial intelligence could simplify the application process, making it more appealing to younger demographics.

However, structural issues within the industry persist. The 60% commission cap limits advisers' ability to service lower-cost policies, even though early engagement could provide the greatest long-term benefit to consumers. With only about 600 specialist risk advisers nationwide, McConville emphasized the need for greater collaboration across the sector to address the underinsurance problem.

For consumers, this underinsurance gap highlights the importance of proactively assessing their life insurance needs and seeking professional advice to ensure adequate coverage. As the industry explores technological solutions and advocates for regulatory reforms, individuals should remain vigilant in securing financial protection for themselves and their families.

Published:Sunday, 14th Jun 2026
Author: Paige Estritori

Please Note: We do not endorse any specific products or companies. Some content is sourced from third parties, including press releases, and may not be independently verified for accuracy or completeness.

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