Insurance policy limits a fact of life

Brad and Belinda-Jayne Penrose had insurance when it mattered most. Picture: Dean Martin Source: National Features

THINKING your health insurance provides you with the same coverage as life insurance is not uncommon.

New data from life insurance company TAL found one in six Australians (17 per cent) believe the two types of insurance provide similar protection.

Financial Services Council chief executive John Brogden says Australians should be "forgiven" for being confused between the two.

"Health insurance will pay for your surgery if you're sick but it won't pay your salary if you're off work for six months," he says.

There are different types of cover that fall within the life insurance umbrella:

Death cover pays a lump sum to your beneficiary if you die.

Total permanent and disability insurance pays a lump sum if you are injured or disabled.

Trauma insurance pays a lump sum if you are diagnosed with a specified life-threatening illness or injury.

Income protection insurance covers you if you are sick or injured and cannot work.

The survey that quizzed more than 1200 people found 47 per cent of respondents do not have enough money or say it's too expensive to take out life insurance.

TAL Group chief executive Jim Minto says cost of living pressures are squeezing budgets even tighter.

"There is an enormous amount of pressure on household affordability in Australia ... people are challenging their budgets for almost everything," he says.

Belinda-Jayne Penrose, 23, who works in sales and marketing, says her dad suggested she get a form of life insurance - income protection cover - when she started working full-time.She says her father's advice was a godsend.

"At the time I didn't think I'd need it, I was only 17," Ms Penrose says.

"But there were two times when I had serious illnesses and I needed to claim on it, and we had a mortgage, so we definitely needed that money. It took a lot of stress off."

Her premium cost her about $30 a month.

Ms Penrose took about a year off work and says the insurance cover helped pay her medical bills and mortgage.

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Aussies ditch their life insurance

Financial Services Council CEO John Brogden. Picture: James Croucher Source: National Features

THE number of Australians dumping their life insurance is at a decade high.

About one in five are failing to renew life insurance, taken out either as an extension on their default cover in their super fund or through individual policies, insurers say.

Financial Services Council chief executive John Brogden says the lapse rate is a worry for the nation, which has a chronic underinsurance problem.

"We are having high lapse rates, we are getting a higher level of non-renewals and it's at a 10-year high," he says.

"It's a concern that people aren't being covered and are dropping their cover."

Different types of personal insurance cover fall under the life insurance umbrella:

* Death cover pays a lump sum to your beneficiary if you die.

* Total permanent and disability insurance pays a lump sum if you are injured or disabled.

* Trauma insurance pays a lump sum if you are diagnosed with a specified life-threatening illness or injury.

* Income protection insurance covers you if you are sick or injured and cannot work.

Brogden says it's important Australians take time to look through their life insurance cover if they have any and determine whether it is enough.

"Believe me, $200,000 or $300,000 is not enough if you're 35 or 40," he says. "It's partly due to the cost of living.

"The more people who have insurance the less people who are on the welfare, it's a very simple formula."

Jim Minto, managing director at life insurer TAL, says "consumer affordability" and "price shopping" are to blame for the drop in cover.

"It's just the same as what is happening in retailing and general insurance; it's really shaking the life insurance industry because it never planned for it to be like this," he says.

"We are seeing people in tighter financial situations managing a budget that's tighter, tighter and tighter and they are more inclined to ask the questions, 'Do I need life insurance and is it too much?'"

The cost of life cover varies greatly, from a few hundred to thousands of dollars a year.

Mark Vilo, executive manager of insurer Asteron Life, also blames affordability for the high lapse rates.

"Regardless of whether life insurance is inside or outside of superannuation, 71 per cent of our business lapses is because of affordability issues," he says.

> PROTECT YOURSELF

If you died tomorrow, how would your loved ones cope financially? Work out the worst-case scenario and how those around you would survive financially.

* Would they be able to pay for expenses such as funeral costs, medical bills, taxes and debts?

* Before buying life insurance, check any cover you may have through your super fund, the amount of cover and if you can increase that level of cover if needed.

* Life insurance is a particularly important type of cover for people with children, debts (such as mortgages) and other hefty expenses (such as school fees or car loan repayments).

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Minister's insurance a matter of policy

Federal Health Minister Tanya Plibersek uses the privatehealth.gov.au website. Picture: Tim Hunter Source: News Limited

Christopher Zinn explains why you would register with One Big Switch and look at your health insurance options.

THE number of people using the official private health insurance comparison website has soared by 55 per cent in a year, as hundreds of thousands attempt to cut the cost of their cover.

The number of "unique visitors" to privatehealth.gov.au has grown from 315,000 to 485,000. Federal Health Minister Tanya Plibersek told News Limited that she had used the site to compare her own family's insurance and discovered policies providing similar coverage varied in price from $200 to $420 per month, meaning there was the potential to save thousands of dollars annually.

"That's a huge difference for your average family across the course of a year," Ms Plibersek said.

The minister found that her family's policy offered some of the best value for money on the market, which gave her peace of mind.

She implored people who had not reviewed their insurance in some time - as well as those who were seeking cheaper or better cover - to use the free comparison service.

"You wouldn't buy the first fridge you saw, or car or house, and the same goes for private health insurance," Ms Plibersek said. "And the good thing about this site is they are not trying to sell you anything."

Shaun Gath, CEO of the industry regulator, the Private Health Insurance Administration Council, said privatehealth.gov.au was "a lolly shop for consumers".

But awareness of the site was relatively low, he said.

Ms Plibersek urged insurers to compete more on price and product - "that's where I would like to see the real competition" - rather than to produce the most attractive TV advertisement.

Ms Plibersek also strongly endorsed the Big Health Insurance Switch campaign - a partnership between News Limited and consumer network One Big Switch.

Save yourself: Join One Big Switch

In just 11 days nearly 60,000 people have joined the campaign by registering their interest in receiving an offer of discount health insurance. The campaign also aims to increase awareness about the need to shop around for cover.

"I think that it is terrific for people to have a look at whether they are getting the best value for money with their private health insurance," Ms Plibersek said.

And in response to News Limited's recent report that privately insured patients in public hospitals could be running up a taxpayer-funded treatment bill of nearly $600 million a year, Ms Plibersek said there was a "need to be careful" about people "taking our private hospital cover and not using it when they could and should be".

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Quit smoking, get cheaper insurance

Picture: Thinkstock Source: adelaidenow

PEOPLE who quit smoking or lose weight could soon win a discount on their health insurance.

The man likely to be health minister if the Coalition wins the federal election, Peter Dutton, told News Limited that it was a "great failing" of the current system that it offered no incentive for people to "take care of their own health".

Mr Dutton refused to discuss details, but sources within the industry said the Opposition was interested in offering a larger government-funded insurance rebate to people who, for example, lowered their Body Mass Index (BMI) or had regular dental check-ups.

Insurers, meanwhile, have been pushing to be allowed to provide cheaper cover to people who lower their risk, as well as those who are healthier. At the moment "community rating" bans discrimination by reasons including health.

"We would very much to like to recognise the fact that people who don't smoke provide a lower level of risk," said Phillip Berner, chief operating officer at Westfund, the 12th largest insurer in Australia with more than 100,000 members. Smokers cost funds about $250 a year more, Mr Berner said.

"Obesity, drug and alcohol abuse (and) mental health are all areas where the same sorts of principle could reasonably be applied."

Mark Fitzgibbon, CEO of NIB, said community rating should only protect people with sickness they couldn't control.

"It shouldn't be designed to protect people against bad behaviour," Mr Fitzgibbon told News Limited. He strongly favoured incentives to encourage people to give up smoking or lower their BMI.

A recent government discussion paper on competition and premiums posed the question: "Does community rating create a barrier to pricing innovation and reduce incentives to keep the sick well?"

A submission from Rob Bramsby, CEO of the fourth-largest insurer, HBF, said "there is no way to reward those who look after their health".

Westfund's Mr Berner said that a consequence of this was the rise of "exclusionary products". A quarter of all policies now fail to cover at least one type of treatment - a five-fold increase on five years ago.

A submission to that discussion paper from 10th-ranked Defence Health CEO David Lynch said: "If risk rating is allowed, exclusionary products may not be required as risk will be priced appropriately."

Health Minister Tanya Plibersek is not persuaded, telling News Limited the Government was "100 per cent committed" to community rating and not in favour of discounts for non-smokers.

"To me that sounds like a penalty for smokers," Ms Plibersek said.

Mr Dutton said he supported the Big Health Insurance Switch. "If it's going to help consumers with their premiums and if it's going to promote private health insurance then it's a great campaign," he said.

Make the switch: Join the campaign

Nearly 60,000 people have joined the campaign by registering their interest in receiving a no-obligation discount insurance offer.

Mr Dutton said he first took out private cover when he was 19. It had provided "peace of mind", especially when his children or wife had required hospital treatment.

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