Advisers have a crucial role to play in helping Australians understand risk insurance and in solving the insurance illiteracy problem that exists across the country.
The industry is acutely aware life insurance is misunderstood in Australia and the findings from the most recent TAL Galaxy Poll 2015 have raised yet another red flag concerning consumers’ understanding of life insurance.
Nearly one third of all respondents said they don’t have any form of life insurance (life, total and permanent disability, income protection and trauma) because they are protected by their health insurance. This presents an opportunity for advisers to address this knowledge gap with clients.
Consumers are simply unaware of the differences between health and life insurance. The challenge is to unpack the differences for consumers and explain the roles of each insurance – that they are mutually exclusive and both equally relevant and important to protecting them in the event of an unexpected illness or accident.
Australians value life insurance, but too many don’t have it
Seventy-one per cent of Australians said that it provides peace of mind if the main income earner in the family has some form of life insurance. Unfortunately, it didn’t follow that these people were adequately insured.
So why are so many Australians confused about the benefits of life insurance and the differences between life and health insurance?
The poll revealed a number of reasons for this, most of which relate to confidence. Respondents revealed themselves to be confident when assessing and buying the kind of insurance they use frequently, like car and/or home and contents, but far less confident when it came to buying life insurance.
Fewer than 20 per cent said they were very confident that they could choose the right life insurance for their needs, and a third said they were not confident at all. What’s more, when respondents were asked to rank 11 financial products in terms of their confidence in choosing the most appropriate one for them, the four types of life insurance – life, trauma, total and permanent disability and income protection – were ranked as the bottom four.
Those who have life insurance don’t know the specifics
Other findings from the poll reinforce the overall picture of confusion. Of those surveyed who do have life insurance, nearly half (43 per cent) were unable to say which conditions were exempt from their policy. It is a fair assumption, therefore, that these same people would be unlikely to be familiar with their policy conditions.
Risk advisers have a crucial role to play
The findings from this latest Poll serve as yet another reminder of the number of Australians who don’t understand the important financial protection life insurance offers, and therefore don’t value it sufficiently to insure themselves adequately. Additionally, of those who do have life insurance, a large number don’t fully understand what they are – and are not – covered for. Policies differ widely. Exclusions, conditions, and even price can vary enormously, so comparing like with like can be challenging without the help of a risk specialist.
The bottom line? As an industry, we need to do more to educate Australians about the financial protection that life insurance offers. Understanding some of the common misunderstandings regarding life insurance is key to addressing and solving the gap in understanding. Risk advisers deal with clients on a daily basis and there is enormous opportunity to help debunk some of these widely held but incorrect assumptions and help Australians make informed choices about financial protection through insurance.
Niall McConville is general manager of retail distribution with life insurer TAL
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