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Sponsored: The real value of life insurance
BY DANIEL WALLER | THURSDAY, 7 JUN 2018   9:48AM

Take a look at the photos on any life insurer's brochures and website and you'll see the happy, smiling faces of families enjoying life. While it's easy to dismiss the glossy images as marketing hype the reality is life insurance can positively transform lives. So why does our industry get such a bad rap and what can we do about it?

There's no doubt our industry is facing some serious challenges from negotiating LIF reforms, preparing for new education standards and bracing for greater regulatory scrutiny to increasing competition, stagnating returns and escalating claims.

With so much going on it's no wonder the message about supporting Australians when they need us most, can get overlooked.

The reality is the life risk industry paid over $9 billion to policy holders in 2016 to help offset the devastating financial effects of death, illness and serious injuries. Asteron Life paid out over $390 million in claims last calendar year which has clearly had a profound impact on customers' lives.

So why then does the life industry have an image problem?

It seems to me the life industry's image is being shaped by a lack of knowledge about life products, how financial decisions are made as well as growing public and media scrutiny of the whole financial services sector.

It's evident that over the years, life insurance products have become more complex. Insurers have continued to adjust policies to add more features and benefits in the hope of capturing new markets.

Unfortunately, this has created a plethora of complex insurance products that are not only costly and difficult for insurers to manage but hard for consumers to understand. So, there's an opportunity for insurers to strip away unnecessary complexity to provide products that have a clear purpose, are easy to understand and affordable. This will make it easier for advisers to find the best policy for their clients' needs and help them to explain how this cover can protect them at claim time.

We know transparency and simplicity can make a big difference to how consumers view insurance, which is why Asteron Life is simplifying the wording of some of our medical definitions. We're also working hard to increase product flexibility and affordability by introducing optional features so policies can be better tailored to individuals.

While it's obvious insurance product knowledge can influence the type of cover consumers take out, the impact of behavioural psychology on purchasing insurance is less well known.

Interestingly, how our brain is wired can be a barrier to purchasing life cover. That's because inherent behaviours can bypass our rational thought processes making it difficult for us to make important financial decisions. For example, behavioural psychologists tell us 'status quo', 'optimism bias' and 'short-termism' can anchor us in the present and make us feel overly optimistic which can make it hard to value the benefits of life insurance.

Advisers who understand the impacts of human instincts on making financial decisions will be able to better serve their clients and help to close the widening underinsurance gap.

The media is also a powerful influence over how life insurance is viewed. Lately, attention has focused on the times when we don't get it right. While paying out 90% of claims in the first instance is a great start, there's more our industry can do to make sure we're stepping up to meet the high standards of the community. After all, there's a lot at stake.

Against the backdrop of a challenging environment I think now is the right time for us to come together as an industry to create a new, positive narrative that focuses on the important work we do to protect the financial wellbeing of everyday Australians.

Let's break down the negative perceptions and move beyond the glossy images to get the real message out.

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