The Insurance Literacy Index, which measured Australians’ knowledge of life insurance, is an effort to resolve the issue of mis-insurance, according to a statement by the FPA.
Zurich’s general manager of retail and life investments, Philip Kewin, said that “while we all know as a nation we are grossly mis-insured, the report shows just how much financial advice can teach people [about] what type of insurance is needed to protect them”.
“The FPA/Zurich Insurance Literacy Index shows there is a direct link between getting advice from a professional and improved insurance literacy,” he said.
“The Index shows the average insurance literacy score across those without a financial adviser is 4.5 out of 10, but when we look at just those who are advised the literacy levels jump by 50 per cent to a score of 6.7, which is approaching ‘excellent.”
Mr Kewin said there are tangible examples of the positive impact advisers have on clients in terms of their understanding of insurance.
“We found that those who see an adviser are less likely to mistake services such as the NDIS, Centrelink and even health insurance to be life insurance substitutes. And for those Australians who have life insurance, the advised are considerably more likely than the unadvised to understand their coverage, with 82.9 per cent more likely to know their approximate sum insured,” he said.
“The real opportunity here is for advisers. Our report proves that advisers are effectively educating customers about different types of insurance including superannuation-based life cover. By teaching clients about what insurance products are right for them at different life stages, they are continuing to prove their value but more importantly will turn more clients into advocates.”
The report also shows that while a majority of Australians hold some form of life insurance (59.9 per cent), most of them sign up to these policies through their super fund (62.7 per cent), with more than one in five (21.1 per cent) sticking with their super fund’s default insurance cover because they trust their super fund or employer to know the correct level of cover for them.
This reliance on default cover is driven largely by a misunderstanding of the different types of insurance and financial protection, the statement said.
“People often think that their default level of insurance cover is enough to protect them financially, creating a false sense of security,” Mr Kewin said.
“The risk is obviously that without a personal assessment of needs, people can find themselves in dire straits if something goes wrong, finding out the hard way that they are mis-insured, as their policy does not cover them for the risks they thought they were protected against.”
Dear Mr Kewin
I offer advice for clients from a nearly 30 year perspective
Under Framework I will not be paid adequately for that advice but you at Zurich still get the business you need to prosper
The life industry will go down the gurgler if we are not paid for our advice. I suggest you tell that to the Asst Treasurer