Consumer Attitude is Main Reason for Underinsurance – Poll

The main reason for Australia’s underinsurance problem lies in consumer attitudes towards life insurance and/or financial advice. This seems to be the message emerging from the results of our latest poll, which is asking advisers to consider the most significant factor contributing to underinsurance in Australia.

As we go to print, 42% of those taking our poll, mostly advisers, have said consumer attitude is the main cause, followed by general economic conditions and affordability (28%), product complexity (9%) and life companies failing to learn from the lessons of the past (also 9%).

One adviser has picked us up on a possible mistake in our poll, which failed to offer ‘consumer apathy’ as a stand-alone key factor that contributes to underinsurance:

Apathy is a determining factor for the massive under-insurance problem

“Apathy would have been a valid reason on its own that I guarantee would have got the majority of votes. Did the author not consider this a reason at all?”

This adviser’s point was also reinforced by another comment we received from regular contributor and long-time adviser, Jeremy Wright:

“Apathy is a determining factor for the massive under-insurance problem.”

So, while ‘apathy’ was meant to be covered within the broader point of ‘consumer attitude’, there’s solid support from these and other advisers that the very Australian notion of  ‘she’ll be right’ still lies at the heart of this country’s underinsurance dilemma.

… [consumers] need to understand that the most valuable asset they have is their potential future earning capacity

… And while the industry awaits the release of the Trowbridge recommendations for more self-regulated changes to the life insurance sector, not a single adviser has suggested that the nature of their remuneration has anything to do with the underinsurance issue itself. Rather, the focus is on ingrained and cultural issues – issues that won’t be overcome in the short-term, but only over time, if the right message about the value and importance of life insurance can somehow break through the ‘she’ll be right’ barrier.

One possible focus of this message has been outlined by Peter Hawks, who commented:

“We somehow need to educate the consumer as to their real CAPITAL value. In other words they need to understand that the most valuable asset they have is their potential future earning capacity.”

Our poll remains open for another week and we welcome your further contribution to this discussion…