Why Life Insurance is Bigger Than Just Paying Claims

Most people think life insurance is about paying a claim. In reality, it’s something far bigger and far more important to the economy than most realise. At a recent RiskInfocus conference I attended in Melbourne, Acenda Education Manager Marshall Ross challenged advisers to rethink how we talk about life insurance. His argument was simple: we’re selling it too small.

Most conversations focus on individual needs and claims, incredibly helpful in terms of meeting client objectives, but Ross argues there’s a bigger picture. Considering life insurance as part of the broader Australian economy and that it should be positioned as a core pillar of Australia’s financial and social infrastructure.

Ross highlighted three big structural shifts:

• We’re getting older: The proportion of Australians over 65 is rising rapidly. Retirees are projected to roughly double from around one in ten to one in five in coming decades.
• Fewer taxpayers funding more costs: Income tax still does most of the heavy lifting for government revenue, but there’ll be fewer working‑aged people supporting more retirees.
• Longer lives, not always healthier lives: Chronic illness and disability are becoming more common.

In his words, as a community: “We’re carrying more risk, for longer, with less buffer.” Ross estimated the economic cost of disability and lost productivity in Australia now exceeds $140 billion each year. If we look at life insurance as an economic safety valve, Ross argued that it provides a double benefit:

1. It pays benefits to individuals and families when certain life events occur; and
2. It eases pressure on the public system by:
   • supporting earlier treatment and rehabilitation
   • helping more people get back to work
   • reducing reliance on government‑funded support.

Ross’s modelling indicates life insurance currently delivers $20 billion in annual economic value, quietly offsetting:

• about $660 per taxpayer per year in direct costs, and
• a further $1,300 per taxpayer per year in broader avoided impacts.

It basically acts as a shock absorber for the whole economy.

Despite its importance, life insurance still sits behind motor, home and health insurance for many households. Behaviour plays a big role:

• We tend to focus on visible risks (crashing the car, storm damage to the house).
• We underestimate the impact of illness or long‑term income loss.
• Clients often lean on the idea of “self‑insurance”.

Ross challenged that thinking: “When people choose not to insure, the risk doesn’t disappear, it shifts.”

In Australia, much of that cost ultimately shifts to the public system and taxpayers when people can’t work, need care, or run down savings faster than expected.

Ross said that we could see policy change in the future, and referenced incentives around private health insurance uptake and compulsory motor vehicle insurance as examples of how the government has looked to manage risk in the past.

One of Ross’s most practical insights is that good risk advice adds value even when there’s never a claim.

Modelling presented at RiskInfocus showed that structured insurance can improve long‑term outcomes through:

• more tax‑effective ownership and funding of premiums
• better alignment between cover, business structures and estate planning
• ongoing management as clients’ circumstances and legislation change.

Or, as Ross put it: “People make better financial decisions when they’re protected.”

Knowing that income, debts and family are protected allows clients to invest, plan and make decisions with more confidence, instead of reacting under pressure when life goes off script.

Where did Ross leave the conversation? His message and challenge to advisers was to rethink the conversation. To stop framing life insurance purely around “if you claim” stories, and start positioning it as:

• a pillar of family financial resilience, and
• a critical part of Australia’s broader economic framework.

The implication is clear. As Australia’s safety net comes under pressure, the responsibility increasingly shifts back to the individual and the family. The question is no longer whether risk exists, it’s how well it’s managed. That starts with pressure testing your current position:

• What would happen if income stopped tomorrow?
• How long would existing assets sustain your lifestyle?
• Where are the gaps?

At Hewison, we view risk management not as a standalone product, but as a core part of a well-structured financial strategy, designed to protect, enable and sustain long-term wealth. The reality is, risk doesn’t wait for the right time. Taking the time to properly assess and structure your cover today can change the decisions you’re able to make tomorrow.

If it’s been some time since you’ve reviewed your position, or you’re unsure how your current cover aligns with your broader strategy, it may be worth revisiting. Contact Us to review your position.