Australians have poor insurance literacy with less than 20% of people possessing a good understanding of disability or death insurance which is reflected in low levels of life insurance cover, according to a global comparative survey commissioned by Zurich.
The survey, conducted by the Smith School of Enterprise and the Environment at Oxford University and covered more than 11,000 people in 11 countries, including around 1100 people in Australia found the latter had less savings, lower levels of financial literacy and low levels of life insurance.
At the same time, Australians were more likely to underestimate the risk of death, illness and injury compared with other consumers in other developed economies with 47% believing they had a probability of 10% or less of experiencing income loss due to illness or disability.
Within the Australian response group researchers found 37% of people without disability cover would consider buying it which was the lowest figure among the 11 nations surveyed despite 44% stating they had experienced some degree of income loss due to sickness or accident and only 27% had protected their income.
The survey also found that Australians had a high expectation of Government support but nearly 70% believed it should not extend beyond a year
Zurich stated the expectation that the government would cover 40 percent of lost income was “…at odds with reality, especially for higher income earners and especially at a time when the government is tightening eligibility for the disability support pension in an attempt to reign in its $17 billion annual cost”.
Zurich Life and Investments, Chief Executive, Tim Bailey said the protection gaps were real and cultural and educational factors were likely contributors to Australian attitudes towards insurance and risk.
“Australians’ optimism about their state of health and the likelihood of death or disablement is not matched by the actual probability of injury or illness, which makes our relatively low levels of insurance protection even more problematic,” Bailey said.
Bailey said the study highlighted how financial literacy levels affected outcomes and that where literacy was high so as the level of ownership of death and disablement cover.
“The more financially literate countries were also those which had a more realistic understanding of the risks they faced, the mechanisms available to protect against those risks, and the cost”, Bailey said.
