Tower group managing director Jim Minto said it is estimated that Australian families are underinsured to the tune of about A$1300 billion.
He said it was expected that New Zealand faced a problem of similar proportions.
"Major increases in household debt levels over the past few years have not been followed by increases in life cover to protect borrowers from the repayment of that debt should the bread winner die prematurely," Minto said. "Nor have increases in the 'living insurances' such as income protection and trauma, kept pace.
"The almost inevitable effect is that dependants are left under protected and the obligation defaults to governments to provide a safety net."
Tower believes the potential of its insurance business in both Australia and New Zealand is framed by the massive underinsurance of individuals.
"Part of the problem is that in Australia and New Zealand it is difficult for many consumers to get affordable advice," Minto said. "The combination of a shortage of advisers and the relatively high cost of obtaining comprehensive advice mitigates against easy access to life insurance for those people who need it.
"Tower has a strong competitive position in the adviser market and continues to explore alternative distribution channels," he said.
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