New research explores degree of Australia’s mis-informed, mis-insured
Richard Dunkerley
Zurich yesterday released new research showing many Australians have misperceptions about their life insurance, exposing them to a “mis-insurance” gap, the consequences of which may be equally as damaging as an under-insurance gap.
Others are simply mis-informed about the purpose of life risk insurance and so are either uninsured or believe (often incorrectly) they have appropriate cover in place.
Called “Misinformed, Misinsured?” the research polled 394 employed Australians and set out to pinpoint whether or not people properly understand what they are and are not covered for through their superannuation-based life insurance, and the extent to which this aligns with their own stated risk priorities.
For example, do Australians understand the purpose and underlying terms of their TPD (Total & Permanent Disability) insurance? Is Income Protection insurance going to help if I am retrenched? Does a Life insurance policy cover me for a visit to the dentist?
Mr. Richard Dunkerley, Head of Marketing for Zurich’s Life and Investments business, said the research exposed a significant knowledge gap, again illustrating the important role for education and advice.
“Zurich is a longstanding champion of increasing the quality and accessibility of financial advice and education. The research findings are a timely reminder for consumers to become better acquainted with the detail of their policies, ideally by seeking qualified advice, to help avoid the downside consequences of the ‘mis-insurance’ gap,” he said.
“Every individual is different. Insurance cover ideally would match the specific needs of each individual, so it is important that people understand whether or not their ‘default’ insurance option delivers appropriate outcomes matched to their precise needs in the event of a claim”.
Zurich uncovered a number of findings that highlight the potential mis-insurance gap. These include:
- Of those who are covered by their superannuation group life policy, a number wrongly believed they were covered for traumatic illness (11%), hospital expenses (7%), retrenchment (6%) and even dental and optical costs (5%).
- A lack of awareness of Income Protection insurance (sum insured and waiting period) also revealed significant misunderstanding amongst the polled group. Less than a quarter were aware of the amount they were covered for and just 15% correctly identified the waiting period (the time lapse between a claim being made and payments beginning).
- A majority (38%) of poll respondents said they would only survive financially, for just one month before needing to sell assets if personal illness or injury prevented them from working and earning an income.
- Almost 80% of those surveyed said they had never conducted an analysis of their own life insurance needs.
“The results further indicate the need for a more comprehensive program of literacy regarding life insurance to raise the general level of education and understanding amongst Australians,” Mr. Dunkerley said.
“There is a duty of care on all participants within the superannuation, advice and insurance sector to do more to educate consumers at every turn,” he said.
“Zurich believes it is crucial for consumers to seek qualified advice or at a minimum self-educate to ensure appropriate expectations are in place in the event of a person’s death, accident or being prevented from working.”
Mr. Dunkerley said the opportunity was to build better alignment between risks prioritised and risks actually faced by an individual, and the amount and type of insurance cover in place, through that individual’s channel of choice.