Is Life Insurance cheaper “direct” or through a broker?

Life Insurance Direct - higher premiums exposed

Are you paying three times more than you need to for your life insurance?

A common misconception is that you will get a cheaper premium if you buy life insurance “direct”, rather than through an online broker like Insurance Watch.

To debunk this myth, we have obtained life insurance premiums from some of the life insurance direct brands which are heavily advertised on television and compared these to the lowest premium available from the Insurance Watch range of life insurance companies.

How to find the Lowest Life Insurance Premiums

The sample quotes in the premium comparison below are for a male and a female living in Victoria Australia, aged 45 years old, non-smokers and seeking $500,000 life insurance cover.

The life insurance direct brands, rather than being lower in cost, actually cost on average more than three times than those available on the Insurance Watch website!

Why is this the case? Higher marketing budgets, lower retention rates and less information gathered about applicants at application time are just some of the reasons why direct brands cost more. So before applying for “no medicals” cover think what this could be costing you.

To check if a lower premium is available for your policy go to Compare Quotes.

Premium Comparison – what does $500,000 life cover cost?

Cost for male non smoker 45 years old:Monthly Premium% Higher
Insurance Watch – lowest premium$ 26.33
Allianz Life insurance$ 66.73+ 153%
HCF Life insurance$ 89.00+ 238%
Kogan Life insurance$ 93.80+ 256%
AAMI Life insurance$ 93.93+ 257%
Insuranceline Life insurance$ 93.93+ 257%
Suncorp Life insurance$ 93.93+ 257%
Real Life insurance$ 94.03+ 257%
Guardian Life insurance$ 148.59+ 464%
 Average:+ 267%
Cost for female non-smoker 45 years old:Monthly Premium% Higher
Insurance Watch – lowest premium$ 21.53  
Allianz Life insurance$ 51.38+ 139%
HCF Life insurance$ 66.50+ 209%
AAMI Life insurance$ 76.73+ 256%
Insuranceline Life insurance$ 76.73+ 256%
Suncorp Life insurance$ 76.73+ 256%
Kogan Life insurance$ 79.54+ 269%
Real Life Insurance$ 79.73+ 270%
Guardian Life insurance$ 103.47+ 381%
 Average:+ 254%

The above life insurance premium comparisons are accurate as at 5th September 2023 and do not include membership or other discounts. The Insurance Watch quote used is the lowest of the insurance brands we compare and the premium shown is also BEFORE the Insurance Watch 10% cashback offer.

Who are the insurers behind the “direct” Life Insurance brands?

As noted by CHOICE Australia a number of the direct brands listed above are actually owned or distributed by related parties. Therefore websites which only compare quotes from direct brands may actually be comparing a limited number of underlying insurance companies.

For example, in the table above, 3 life insurance brands (Insuranceline, AAMI and Suncorp) are distributed by TAL Direct Pty Ltd, with TAL Life Limited the actual insurer.

In addition, another 3 life insurance brands (Kogan, Real Insurance and Guardian) are distributed by Greenstone Financial Services Pty Ltd with Hannover Life Re of Australasia Ltd as the underlying insurance company.

Ultimately it is the insurance company who is responsible for paying claims, not the distributor or marketing company. See who are the top Australian life insurance companies by market share.

What to look for when comparing Life Insurance premiums

There is a need to be wary of comparison websites which only feature direct life insurance brands, as these comprise only a small segment (less than 10%) of the Australian life insurance market and are typically higher priced.

As can be seen from the above premium snapshot, the premiums offered by the retail policies available through Insurance Watch can be significantly cheaper.

When comparing premiums, it is also important to ensure that the quotes you obtain are for the same payment frequency. “Direct” premiums are often quoted on a fortnightly basis, rather than monthly, making them appear more affordable. They should always be compared on a like for like basis.

Compare Benefits and Look out for Blanket Exclusions

Of course, when shopping around you should not just look at the cost of life insurance products but also consider the benefits offered by each policy (see our tips and traps when buying Life Insurance). Typically retail products will offer more benefits than the more basic products sold directly to the public.

Buying “direct” can mean that your policy will have more blanket exclusions or restrictions, due to the limited underwriting done at application time. You may not be aware of these until you try to make a claim.

Also if you have purchased your policy directly you will have to deal with the insurer at claim time. You will not have the support and assistance of a broker who can act on your behalf.

Claims statistics over time consistently show that direct life insurance policies generally have a lower claim acceptance rate than policies sold by brokers, with the latest statistics shown below.

Claims Admittance Rates 2023

Cover Type:Distributed by Adviser/Broker Direct from Insurer
Life (Death) insurance97%91% 
TPD insurance83%78%
Trauma insurance87%83%
Income Protection insurance95%88%

Source: ASIC/APRA Claims statistics for 12 months ending 31 December 2023

Avoid pressure selling tactics of direct marketing

The 2018 Royal Commission condemned the high pressure sales tactics used by the call centres of direct life insurance brands.

Often this will involve keeping the customer on the phone until they agree to purchase, without the opportunity to make premium comparisons. When consumers do make these comparisons they often find that the policies are poor value as evidenced by the 1 in 5 who drop their insurance policies in the cooling off period.

Insurance Watch provides online comparisons of premiums and benefits for all the insurers we cover. No personal information is required to view these, so you don’t need to worry about being hassled by call centre sales representatives.

Click below to start comparing: