Underinsurance – Apathy or Lack of Trust?

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Is consumer apathy a greater challenge than low levels of trust when it comes to addressing Australia's underinsurance dilemma?
  • Yes (84%)
  • No (9%)
  • Not sure (7%)

Our latest poll asks you to consider the main cause of the nation’s underinsurance predicament.

Research studies, media treatment and anecdotal evidence suggest the life insurance and financial services industry is currently at a low ebb when it comes to trust in the sector by consumers.

The ‘trust’ issue has been well-documented and the industry, together with the Government, has been taking serious steps to address this issue. These steps include the introduction of a Life Insurance Code of Practice, the Future of Financial Advice and Life Insurance Framework reforms and the Professional Standards legislation, all of which have and/or hopefully will, make a positive impact on the perception of the industry in the mind of the consumer, notwithstanding opposition to elements of these initiatives by sections of the industry community.

It has been suggested, however, that apathy is the biggest impediment to more Australians seeking out life insurance and broader financial advice. In our most recently-published industry Round Table discussion conducted in conjunction with the AFA and Zurich, accomplished and experienced advisers appeared to be in general agreement that the biggest roadblock to advisers being able to add value to the 80% of adult Australians who do not seek financial advice is indeed apathy (see: AFA Round Table…).

…the greater challenge is finding a way to convince the consumer to come to the dance in the first place.

Studies have shown that the 20% of Australians who access financial advice hold a high-level of satisfaction with the advice they are provided and trust their advisers to continue to provide them with their wise counsel. The main problem, according to this train of thought, is finding a way for the adviser to sit in front of the client in the first place.

These advisers suggest that it’s not getting the client to trust them and guide them once they’re together on the dance floor. Rather, the greater challenge is finding a way to convince the consumer to come to the dance in the first place.

Determining the main reason why Australians mostly shy away from seeking life insurance and financial advice is critically important, as it will naturally inform the industry as to how it should best address the problem and develop a solution or, more likely, a range of solutions.

In your opinion, which issue is more important to address and solve in order to overcome the underinsurance dilemma – trust or apathy? Or is the issue more complex than simply identifying one issue as more important than another? Both issues are obviously important, but are they equally critical?

It’s time to hand over this discussion to you, and we’ll come back to you next week and report what you see as you stand on the balcony overlooking the dance floor…



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3 COMMENTS

  2. Someone is either ‘minded’ for insurance or they are not. All of the logical and emotional arguments mean nothing unless a consumer has a) recently had a wake up call and seen a friend/family member taken prematurely (or traumatised severely/ income affected) and major financial ramifications around that OR b) is someone who has, for whatever reason, always intrinsically believed in insurance. It is my belief that if a person is neither of these then they will rarely buy personal risk insurance. People who lapse policies, generally, are from outside these two groups and the ones who cause issues with chargebacks. Of course, we have our helpful friends the life companies constantly hiking premium rates so there’s that too . . .
    .
    The old saying that “insurance is sold, not bought” is true however only if the client is pre-conditioned as per the above two descriptions. Unfortunately, life companies will soon find out to their horror what sales of ANY life product will be like when they drive the real advisers from the industry with 50% reduced commissions and doubled chargeback periods. Make no mistake, if life companies really supported and believed and wanted advisers to stay in the industry they would have lobbied for this along side the advisers. That didn’t happen. It is the life companies who decide and pay the advisers and it is the life companies who decide chargeback periods. To intimate anything else is flying in the face of anti-competitiveness legislation and we couldn’t have that, could we. the life companies got exactly what they were after. They will find to their abject horror what a world of robots will deliver them.

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