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  • Mike Donaldson

The VALUE of Protection

The purpose and need for Financial Risk Mitigation could not be over stated in these challenging times. The impact of under insurance or NO insurance is significant when we look at the how much financial support is provided and to how many people receive this support. Although the numbers are staggering in and of themselves. The stark reality is that a high number of these claims and payouts are significantly less that what was required to meet the financial loss. At Periculum our "Fully Funded Estate" and "Total Risk" programs are designed to ensure our clients are never at a financial loss.

To put this into perspective below are the numbers from the most recent industry statistics report from FSC/KPMG.

The telling statistic is the average Life Insurance payout was just $182,437. Figures from the Australian Bureau of Statistics show the average mortgage on an existing dwelling in NSW grew by $112,600 or 22.2 per cent through 2019 to hit an all-time high of $621,500.

Clearly we have a significant under insurance issue.


Key observations:

Over $12 billion was paid out. That’s over $33 million a day.

Life (97% of claims paid):

  • Cancer is by far the number one cause of death claims in men (39%) and women (61%).

  • Accidental death is much more prevalent in men (20%) than women (7%), even topping circulatory system claims (heart etc.)

TPD (90% of claims paid):

  • Mental health comfortably tops the list for men (24%) and women (27%).

Income Protection (95% of claims paid)

  • Accident is the top cause of claim across men (38%) and women (28%).

  • Mental health was only 5th on the list for men (10%), but a clear second for women (22%). Unfortunately, these figures are tipped to rise in 2020/21 as we further realise the impacts of COVID.

CI (86% of claims paid)

  • For Trauma insurance information was limited, the highest cause of claim was for cancer at 58 per cent;

  • CI/Trauma wasn’t broken down to gender, however its’ importance is clear given the role of cancer as a cause of claim across Life/TPD/IP (particularly Life).

Life insurers paid $1.24 billion in 2019 to more than 9,500 Australians for mental health claims.

Drilling down these headline figures, the council says the claims are for an extremely wide and complex spectrum of conditions. The list has a very long tail and the top five underlying types of mental health conditions account for less than half (46.9 percent) of all claims for mental health conditions as follows:

· 16.5 percent – depression, including single and recurrent episodes

· 13.4 percent – unspecified anxiety disorders, for example panic or anxiety attacks

· 11.3 percent – reaction to severe stress, for example post-traumatic stress disorder

· 3.6 percent – Alzheimer’s disease

· 2.1 percent – schizophrenia

With COVID-19 impacting financial stress the incidence of mental health claims seems set to rise. Those families and individuals that have the right Risk strategies in place can at least manage this stress knowing there is a safety net and should things happen a premature death or disability.


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