Jim Minto
People who consider themselves safe financial risk takers are more likely than those with a high risk appetite and those who avoid risk to have an insurance safety net in place.
This is one of the findings from a nationwide Galaxy Research poll commissioned by Australia’s largest life insurer TAL to study the link between attitudes to financial risk and the take up of life insurance products.
Nationwide, 6% of people call themselves financial risk takers, 61% are “conservative” financial risk taker while 28% of people simply want to avoid all financial risk.
TAL Group CEO Jim Minto said the vast majority of conservative risk takers were much more likely to have some form of financial protection in place through one or more forms of life insurance, while very few high risk avoiders held cover and even fewer risk takers having financial protection.
“This really is quite an interesting result because one might assume that both risk takers and those who avoid financial risk would have some financial protection in place, but very few of them do,” he said.
“These findings show that conservative or moderate risk takers are the ones who in most cases have decided to put in place financial protection, not those who embrace or worry about risk.”
The research found that higher income households (those earning more than $90K) and those with a mortgage identified most as conservative risk takers and as the types of people to have protection.
Conversely low income households earning under $40k and young people aged 18 to 24 years were more likely to say they avoid financial risks and have much lower levels of cover.
“The research shows a strong correlation between risk taking behaviour and insurance penetration,” Mr Minto said. “Owning a home and having a mortgage, and a higher than average income, appear to be triggers for people to ensure their future has a safety net. The levels of cover held by lower income earners and renters is a concern. If they can’t work again due to injury of illness their debts and other obligations don’t just go away.”
Other key findings:
- Penetration of all types of life insurance were very low amongst those earning under $40k. Income protection, for example, was held by just 6% of those earning under $40k compared to 37% of those earning over $90k.
- This group also showed the lowest levels of financial risk taking at just 56%, compared to 74% over people earning over $90k.
- Income protection was held by just 20% of Gen Y compared to 38% of Gen X and 19% of Baby Boomers. Financial risk taking was lowest amongst Gen Y (64%) and highest amongst Gen X (72%).
Mr Minto concluded: “There’s often a perception amongst younger people that they don’t need insurance if they don’t own a property and have no dependents. We would suggest that insurance such as income protection is extremely valuable for anyone who has regular financial outgoings such as rent and other loans, especially if there is no one else to pay the bills if they lose their ability to earn an income.”
Table 1: Attitudes to financial risk and insurance ownership status
| Risk profile | Risk profile results | Insurances held according to risk profile | |||
| Life | Disability | Income protection | Critical Illness | ||
| Financial risk taker | 5% | 8% | 8% | 9% | 10% |
| Take some risks but mostly conservative | 61% | 70% | 75% | 76% | 72% |
| Risk avoider | 28% | 20% | 16% | 14% | 16% |
| Don’t know | 5% | 2% | 1% | 1% | 2% |
Table 2: Attitudes to risk by home ownership status compared to insurances held
| Own home outright | Own home with a mortgage | Rent | National | |
| Risk taking profile | ||||
| Financial risk taker | 4% | 7% | 7% | 6% |
| Take some risks but mostly conservative | 62% | 65% | 55% | 61% |
| Risk avoider | 32% | 25% | 28% | 28% |
| Don’t know | 2% | 3% | 9% | 5% |
| Insurances held | ||||
| Life ‘space’ insurance* | 48% | 63% | 41% | 52% |
| Life insurance | 40% | 52% | 32% | 43% |
| Disability insurance | 21% | 35% | 13% | 24% |
| Income protection insurance | 19% | 36% | 16% | 26% |
| Critical illness / trauma / crisis insurance | 21% | 24% | 12% | 20% |
* Collective term for life, disability, income protection and critical illness
Table 3: Attitudes to risk and insurance penetration by income
| Under $40k | $40k to $90k | Over $90k | |
| Risk taking profile | |||
| Financial risk taker | 5% | 8% | 6% |
| Take some risks but mostly conservative | 51% | 62% | 68% |
| Risk avoider | 35% | 26% | 28% |
| Insurances held | |||
| Life ‘space’ insurance* | 29% | 53% | 63% |
| Life insurance | 24% | 40% | 53% |
| Disability insurance | 4% | 19% | 36% |
| Income protection insurance | 6% | 22% | 37% |
| Critical illness / trauma / crisis insurance | 10% | 16% | 26% |
* Collective term for life, disability, income protection and critical illness
