Women remain one of the demographics underinsured or not insured at all. Maggie Johnson AFP® from Ausure Financial Group Victoria and Kristen Lennis-Harvey from AIA Australia Insurance speak to Miriam DeLacy on how the financial planning profession can better meet the personal insurance needs of women.

The impact of the gender pay gap on the financial security of women is well-documented. An important conversation about the resulting disparity in superannuation savings for men and women is also coming to the fore. In a key observation from their Retirement Income Review report, the panel members acknowledged that “many stakeholders pointed to inequitable retirement outcomes for various groups, such as women, Aboriginal and Torres Strait Islander people, those with disability and those not covered by the Superannuation Guarantee.”

In addition to these potential obstacles to better financial outcomes, women are also experiencing a third ‘gap’ putting them at risk. “We know that underinsurance is an issue in Australia and that women make up a significant portion of underinsured Australians,” says Kristen Lennis-Harvey, General Manager, Retail Distribution – Client Development for AIA Australia. “Much of the research points to a discrepancy between superannuation and the retirement gap when comparing men and women. Once you factor in the insurance gap, it’s evident that there is a lot of work to do and this is something the industry is continually working on, regardless of whether you’re an insurer, financial planner or regulatory body. The biggest challenge is how do we effectively communicate the message to women.”

Why women forego insurance

In order to address this challenge, it’s important to acknowledge why women tend to miss out on personal insurance. According to Kristen, the insurance gap comes from a combination of economic and family factors. “Many people take on a ‘personal needs analysis’ whereby they consider their situation from a financial point of view, work and family situation and other commitments,” she says. “As a result, both women and men need to consider all contributions to a family dynamic, and not just the financial component.

“As we know, while more women are in the workforce than there used to be, many are on contracts or working on a part time or casual employment basis, which from the financial side of things may limit additional expenses that can be allowed”

Financial planner Maggie Johnson AFP® of Ausure Financial Group Victoria agrees the contribution women make to the family unit can be less obvious to clients in economic terms and presents as less of a risk to financial stability as a result. “When a woman is the stay-at-home parent or works part-time, they’re not in that breadwinner category,” she says. “Traditionally insurance, has been about protecting families against the risk of losing earned income. More often now planners are bringing awareness to families to help them consider the impact if a stay-at-home parent were to fall ill or become injured.”

In Maggie’s view, a rise in the number of women in the financial advice profession is also bringing this financial risk to families into focus. “In the past, many women would be reluctant to engage in the financial planning process on their own behalf,” says Maggie. “With more women in the profession comes the opportunity for women clients to understand the benefits of insurance from the perspective of their female peers.”

As can be the case for all financial planning clients, women sometimes assume their insurance cover in super is enough. “This is an even riskier assumption for women to be making when they’re taking a career break,” says Maggie. “Income protection cover, when included in group insurance cover, is likely to be invalid if you’re not working. But there are also some group insurance contracts where TPD cover can be compromised if you’re not in paid work.”

“While it’s often better to have group insurance through super rather than no cover, it’s also important to make sure you can actually claim if an insurable event were to occur,” she adds. “Otherwise there’s no point making these payments and taking away from valuable retirement savings.”

Cover that counts

This highlights the value of financial advice in guiding women in their personal insurance choices – from the risks of not being insured at all to selecting types of cover that are best for their particular needs. For women who are in and out of paid work, both Maggie and Kristen point to the value of trauma cover over income protection.

“Income Protection, especially if Indemnity based, may not be suitable if your client is not working or taking extended time off work,” says Kristen. “This is where trauma cover, which pays a benefit regardless of your employment status, could be considered particularly if you are taking extended periods of time off work to care for parents or children.”

“Trauma cover is particularly important for women, because of the high incidence of breast cancer in Australia,” agrees Maggie. “Five years ago the Independent Financial Adviser were informing financial planners about the very high number of trauma insurance claims (84 per cent) caused by cancer in women. This compares with just over half of cancer-related claims for men under trauma insurance in the same period.”

In comparing trauma cover, it’s also important to understand the terms of cover with respect to partial payouts and having the ability to reinstate cover and claim on the same condition. This is particularly important for women who have a history of breast cancer in their family and may require earlier intervention when symptoms present or expect to undergo multiple treatment cycles.

“In 2020 AIA Australia launched its new trauma-based cover, Crisis Extension, which complements our traditional comprehensive trauma cover, Crisis Recovery,” says Kristen. “We know that breast cancer is the most diagnosed cancer amongst women in Australia. Obviously, there are stages in cancer. And this is where the two Crisis products work together.

“For example, an early, non-life-threatening diagnosis can be claimed under Crisis Recovery. If a cancer diagnosis reaches stage three or four, then clients can claim under Crisis Extension or both depending on their claim history. This allows women to claim more often. And the beauty of Crisis Extension is that because it covers clients for higher severity cases, we have been able to reduce the premiums on offer overall.”

When meeting with clients looking to start a family or have more children, Maggie will also discuss trauma inclusions that can protect their finances in the event of birth defects or medical conditions occurring during infancy. “Some policies can include trauma cover for your child up to age two when they’ll be eligible for their own cover under a separate children’s trauma policy,” she says.

In Maggie’s experience, child trauma cover is one type of insurance that can often been overlooked in the advice process, even though she considers this to be just as critical a risk to a family as parental trauma. “Child trauma cover can be an essential for families, regardless of whether each parent is working or not,” she says. “For one of our clients who was a widowed single mother, we arranged a full suite of insurances for her – life, TPD and child trauma. When one of her children became ill, the family had to relocate to Melbourne for the course of treatment. In a situation like this for a couple, no parent would want to have to stay behind and work and not be available to support their child and family through a critical time.”

Better education and communication

It’s in sharing scenarios like these with clients that Maggie can guide them towards a greater awareness of their unmet insurance needs. “I’ll ask female clients about what things would look like for their family unit if they were ill or injured and weren’t able to shop and run the kids to school,” she says. “Would your spouse have to stop working or would you hire someone to assist?

“Some women will have family to rely on, but COVID-19 really tested this scenario with the travel restrictions and elevated health risk for older family members. Plus there are other circumstances that can limit access to family support. I advise many families in regional Victoria and they need to be aware of the possibility of needing to relocate to Melbourne for treatment, due to the limits on health provisions closer to home. Not only could this rule out family support, it also adds to the cost and makes it far less practical and desirable for a partner to continue working.”

These direct conversations with clients are one approach that’s needed to better communicate to women about the cover they need to be fully protected. Maggie would also like to see better education at a broader level to raise awareness. “Most advertising you see is targeted to the main breadwinner in the family,” she says. “The majority of the time, that’s still a male partner and the advertising reflects this. This approach only addresses the risk to family units with children if the father is unable to work. It would be good to see a more inclusive view on personal insurance in advertising.”

Kristen agrees that educating both genders on the benefits of insurance should be a higher priority. “In many cases, and this lends itself to further education not just for young women but for young men as well, there is lack of awareness with regards to protecting your future,” she says. “Early introduction to the concept of life insurance I believe, will help improve future clients’ knowledge of what they’re applying for, and in return making the job of a financial planner less complicated, and maybe even a sought after, career.”

Life stage advice

As with all financial planning clients, women’s insurance needs can change over time. With women far more likely to take time off work, a life stage approach to personal insurance is even more important. “If I’m seeing a couple with plans to start a family, it’s a great opportunity to map their expectations of how they will navigate the change in circumstances if they do have children,” says Maggie. “How many kids might they have, are both partners planning to work in some capacity, will there be a primary caregiver and who will that be? And what family support can they expect to benefit from in the event of one partner becoming injured or falling ill?”

Becoming a parent can trigger one of the biggest lifestyle transitions for a woman and, with it, an associated change in her insurance needs. Relationship breakdown is another a trigger that can force women to reconsider the risks they face and insurance solutions they need for protection.

“Going through a divorce will involve a multi-faceted discussion with women about estate planning, superannuation and retirement,” says Maggie. “There are questions about whether they will have more or less responsibility, more or less income and it’s vital to make sure their cover and sums insured reflect their current situation.

“It can be a time when women are changing their objectives and taking control of what they’d like to happen in the future. Perhaps they’re more aware of the need to protect themselves so they can have peace of mind that they and their children will be looked after if anything should happen.”

For women who are taking sole responsibility for family income, whether single or in a relationship, certain types of cover can become more important “Income Protection and TPD insurance are covers that provide protection if a person was to become the sole ‘bread winner’, unexpectedly single, or unable to work,” says Kristen. “Regardless of the relationship status, removing an income can put enormous financial pressure, at a time when the focus should be on recovery.”

With more and more women entering the workforce and taking responsibility for caring roles for elderly parents as well as children, sometimes well into adulthood, their mental health can be as much of a concern and a risk as cancer or some other type of trauma. “With the increasing prevalence of mental health issues, we should all be mindful of the impacts that this may cause,” says Kristen. “This is where TPD plays a significant role. At AIA, we have, over the last year in particular, experienced higher rates of women claiming for mental health conditions under their TPD policies.” 

Room for improvement

With improvements in gender equality in the workplace, including more access to flexible working arrangements, women are finding better ways to combine a career with raising children. In Maggie’s view this creates great opportunities for insurance providers to introduce products suited to the way women’s lives change and for planners to stay on top of their insurance needs. “Women are likely to move through different life stages a lot more than their spouse,” she says “They’re in and out of the workforce and might open their own business to give them the flexibility at work they need if they can’t make these arrangements with an employer. It’s important for them to get advice at all these stages.”

“Given these changes in how women live and work, there’s a need for product providers to move with the times and think outside the box,” she adds. “There are often barriers for women around getting income protection, particularly around the cost and the number of hours they work. So it’s much harder to get a high-quality policy.”

The rising cost of income protection policies in general was the subject of a recent Australian Financial Review article, which reported figures from Finder on the gap in premiums paid by women and men for the same sum insured. A man earning $10,000 a month, for example, pays about $72 a month for monthly payouts of between $7500 and $8000. For a woman on the same income, the expected premium is $101.

Addressing these barriers to adequate income protection for women is something that AIA is doing with their new Income Protection product – IP Core. “This product is designed to meet the new APRA guidelines, with pricing sustainability being a core component” says Kristen. “The product design will be well suited to anyone who needs to stick to a budget. Women, and in particular low-income women will find this product better suited to an annual budgeting process, where the income may only be increasing with CPI, whereas a traditional income protection product may be increasing with a higher multiple.”