A major research report by the Financial Services Council (FSC) and life insurer MetLife has revealed that Australians are apathetic when it comes to life insurance.
To combat the poor results, it would help if the government provided a tax incentive or disincentive like the current private health insurance arrangements, said John Brodgen, the CEO of the FSC.
“This would increase the uptake of life insurance and replace the need for public expenditure in the long term,” he said. “The research is clear – Australians don’t understand the benefits of taking out life insurance.”
Brogden added that given the almost $1.1 trillion death and disability underinsurance gap, it’s obvious that the industry needs to change the way it talks to Australians about life insurance
CEO of MetLife Damien Green agreed, and said insurers need to work together to develop life products that consumers want and will benefit from.
“The research shows that most consumers don’t understand life insurance terms such as total permanent disability and income protection,” he said. “It found most consumers only think of life insurance as ‘death cover’ rather than a range of protection solutions available.”
The report was implemented in order to gain insights into what motivates people to take out life insurance, and what prevents them from taking it out.
It shows that Australians are more willing to insure their visible assets such as their house and car, than their lives and health.
Key findings of the research include three-quarters of Australians thinking of life insurance as only death cover, a big overestimation of the cost of cover and an underestimation of the value, and only about half (48%) of those surveyed owning, or knowing they own, a life insurance product.
Previously David Phelan of Effective Referral Management told Wealth Professional that advisers should be forging bonds with other professionals such as lawyers, brokers, and accountants to combat underinsurance.
“There are some pretty alarming statistics around about the levels of life insurance cover with an average of about $80,000,” he said. “A lot of people don’t have income protection or trauma insurance,” he said. “For people between [the ages of] 25-40, the overall level of insurance has dropped 25%.”
Everyone would be a winner if advisers aligned themselves with professionals who have big client bases and are in a strong position to refer their clients due to a solid existing relationship, he said.
“The key thing advisers must do is help these professionals understand that [referring and] enhancing a relationship with the client will grow their business. That’s the way to get them see what’s in it for them,” he said.
Life insurance issues remain the same 10 years on
“Worrying” reliance on superannuation life insurance
Child cover “too sensitive” for advisers to tackle