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HBO's hit television series "Succession" has captivated audiences with its gripping portrayal of the Roy family's power struggles and their battle for control of their media empire. While we wait on the edge of our seats to witness the aftermath of this week's episode, there are valuable life lessons to be learned amidst the drama and intrigue. Spoiler Alert: One of the most important takeaways is the necessity of preparing for the unexpected through proper life insurance planning.
"Succession" follows the tumultuous lives of the Roy family, headed by patriarch Logan Roy, as they vie for control of their sprawling media conglomerate. For three seasons we witnessed Logan's health deteriorate, and his children—Kendall, Shiv, Roman, and Connor—engage in a ruthless competition for the throne. The show expertly weaves together themes of power, loyalty, and family dynamics, highlighting the fragile balance that exists within even the wealthiest of families.
The life insurance market has remained relatively stable in recent years. As of 2021, the size of the market, as measured by annual premium income (excluding reinsurance), increased by 1.4% to $17.9 billion per annum. This stability, however, masks some underlying trends that warrant attention.
New business and lapse rates have continued to be low across all product groups. This trend can be attributed to several factors, including the declining number of registered Independent Financial Advisors (IFAs), rising premium rates, and increasing pressure on the cost of living due to high inflation and rising interest rates.
According to the latest APRA data, the number of lives insured by the market has continued to decrease in 2022 (data through to Dec-22), albeit at a slower rate (-1% compared to -10% the previous year). This suggests that the stable premium income at an industry level has been generated by a combination of cover increases due to inflation and price hikes across the market, some of which are age-related, while others are in response to rising claims costs and losses in recent years.
One significant trend in the market is the increase in the average premium per policy for risk products which rose by 8.3% in the 12 months to 31 December 2022. In Australia today, around 15 million people are insured, collectively paying a total of $17.3 billion in group life and individual insurance premiums each year. However, Australians may unknowingly be underinsured.
An analysis by NMG Consulting highlights significant gaps in coverage and benefits in the current system relative to the community standard, particularly among middle age/high dependency demographics. Most Australians have some level of life risk cover through their superannuation fund (default group insurance) for both Death/Total and Permanent Disability (TPD) and, to a lesser extent, Income Protection.
While some older people may insure beyond the community standard (for a variety of personal reasons), this is part of a well-functioning market catering to those with higher needs. However, the "fullness of insurance" may indicate a lack of flexibility in options. In total, there are an estimated 1.0 million Australians underinsured for Death/TPD and 3.4 million underinsured for Income Protection.
While the Roy siblings are grappling with the emotional turmoil they are feeling from the sudden passing of their father in Episode three of the current (and final) season, as is expected they are also quickly assessing how to manage the potential risks to their company that are anticipated to follow.
Risk management in the context of this discussion deals with insuring to the extent possible, against the risk of economic loss from premature death, disablement, illness or accident. Whilst not all eventualities can be covered, a wide range of options are available, including:
To illustrate, here are some of the key insurance takeaways from Succession:
Throughout the show, the Roy family's infighting and rivalry lead to devastating consequences, leaving their future uncertain. This serves as a stark reminder of the importance of protecting your family's financial well-being. Life insurance provides a safety net that can help your loved ones maintain their standard of living in the event of your untimely death.
The twists and turns in Succession demonstrate how life can change in an instant. A comprehensive life insurance policy can provide peace of mind, knowing that your loved ones will be taken care of financially in the face of uncertainty. Preparing for the unexpected is crucial, as it allows you and your family to focus on navigating emotional challenges without the added stress of financial burdens.
Succession is full of broken marriages and messy divorces. This is an important reminder to update your life insurance beneficiary if your marital status changes to avoid benefits ending up unintended hands (viewers are intrigued on where Kerry may be placed in this scenario). In most circumstances the insurance company will pay out the death benefits to the beneficiary listed on the policy, regardless of whether this is an ex-spouse or deceased person, which can cause legal issues and associated fees.
The Roy family's immense wealth highlights the importance of estate planning. Life insurance can be an essential tool in mitigating the impact of estate taxes. You would like to ensure that in the event of your death, your estate will have the funds necessary to make the equitable distribution of your assets that you would prefer. Risk Management in the form of Insurance can be an effective tool to help you achieve these goals. By establishing a life insurance trust, you can ensure that the proceeds of your policy are used to cover estate tax liabilities, thereby preserving your family's wealth for future generations.
The Roy family's media empire is constantly at risk due to their internal power struggles. Business owners should take this as a cautionary tale and ensure they have adequate life insurance in place. This can provide financial stability for the company in the event of an owner's death, allowing for a smoother transition of leadership and minimizing disruptions to operations.
Given the significant number of Australians who are underinsured, it is essential to reassess your life insurance coverage regularly. Ensure that your policy is in line with your current financial needs and the community standard. By doing so, you can protect yourself and your loved ones from the devastating financial consequences that can arise from inadequate life insurance coverage.
While "Succession" may be a work of fiction, and we are yet to find out what Logan Roy had in place concerning his own estate, it offers valuable insights into the importance of life insurance and seeking advice from a trusted Financial Advisor. By taking the time to assess your family's needs and plan accordingly, you can ensure that your loved ones are protected from the financial challenges that often accompany life's unforeseen circumstances. To find out more about how Honan can support your personal and business needs, please feel free to reach out at any time.
Peter Blassis
Senior Risk Advisor - Honan Life Insurance Group
peter.blassis@honanlife.com.au
