New research has revealed the extent to which Australians have misperceptions about their life insurance and are consequentially setting themselves up for disaster.
But Zurich’s head of marketing for life and investments business said this lack of knowledge demonstrates an opportunity for advisers to reach this market through new and innovative channels.
Zurich today released research that has exposed a ‘misinsurance’ gap in the Australian market and shows that many do not understand what they are and are not covered for through their superannuation-based life insurance.
Called Misinformed, Misinsured?
the research polled 394 employed Australians in order to pinpoint what they believe they are covered for through their life insurance, and how this aligns with their own stated risk priorities.
Richard Dunkerley, head of marketing for Zurich’s life and investments business, said the results are concerning.
“We’ve seen a massive explosion in self-service insurance, and similarly we’re seeing a lot of people that have insurance automatically given to them through superannuation,” he said. “One of the conclusions is that this is lulling people into a sense of false security. There’s an opportunity for providers at every point to provide education to consumers.”
Almost 80% of those surveyed said they had never conducted a needs analysis of their own life insurance; and big misperceptions included assuming a super fund life policy covered trauma, which it legally can’t, and a complete lack of knowledge about the salary continuance cover offered by a superannuation fund.
“Super funds give a degree of cover that is not tailored to your circumstances, it’s more of a formula,” said Dunkerley. “People assume that the amount they’ve got is the right amount for them, but generally it isn’t because it’s not based on their personal circumstances.”
One important finding to come out of the research was misperceptions about salary continuance cover due to personal illness or injury, which was particularly worrying considering participants’ levels of savings.
Generally income protection will kick in after a three month wait, said Dunkerley, however a majority of respondents (38%) said they would survive financially for just one month if they were forced to stop work after injury or illness, before needing to start selling assets.
“A significant proportion of people assumed it was a two week wait or less – so they’ve badly underestimated it,” he said.
Dunkerley was also surprised that a number of participants believed that their super fund insurance covered things like visits to the optometrist and the dentist.
“We’ve got people thinking they can go and get their teeth fixed.”
Zurich is calling for a duty of care within the superannuation, advice and insurance sector to do more to educate consumers.
Advisers are faced with a huge opportunity to educate and help Australian’s to cover themselves correctly, and with new technology evolving every day there are many innovative and inexpensive channels that can be used, said Dunkerley.
“There’s no doubt that from an adviser’s perspective this demonstrates that the need for quality advice has never been greater. We need to look at the evolution of how people are communicating, interacting and learning,” he said.