Advisers key to improving insurance literacy

A new report from CoreData titled The Life Insurance Literacy Gap – which was jointly commissioned by the FPA and Zurich – found advisers are the key to helping improve Australians’ understanding of life insurance.

“We found that those who see an adviser are less likely to mistake services such as the NDIS, Centrelink and even health insurance to be life insurance substitutes,” Zurich general manager of retail life and investments Philip Kewin said.

“For those Australians who have life insurance, the advised are considerably more likely than the unadvised to understand their coverage, with 82.9 per cent more likely to know their approximate sum insured.”

“The real opportunity here is for advisers. Our report proves that advisers are effectively educating customers about different types of insurance including superannuation based life cover.

Mr Kewin added the report found the average insurance literacy score across those without an adviser is 4.5 out of 10, but when looking at those who are advised the literacy levels jump to 6.7.

Also found was while the majority of Australians hold some form of life insurance (59.9 per cent), most of them sign up to these policies through their super fund (62.7 per cent).

Of those who rely on insurance through their super fund, more than one in five (21.1 per cent) stick with their super fund’s default cover because they trust their fund or employer to know the correct level of cover for them.

“People often think that their default level of insurance cover is enough to protect them financially, creating a false sense of security,” Mr Kewin said.

“The risk is obviously that without a personal assessment of needs, people can find themselves in dire straits if something goes wrong, finding out the hard way that they are mis-insured, as their policy does not cover them for the risks they thought they were protected against.”