Consumer ignorance undermines life
The growth potential of the life industry in Australia is being curtailed by “poor consumer understanding of the true benefits of life and related insurance”, according to a new research paper by the Investment and Financial Services Association’s (IFSA’s) Protection Gap Working Group.
‘Project Lingo — the Language of Life Insurance’ found this lack of under_standing is “often exacerbated by conflicting messages and language patterns” used by marketers and product managers to communicate their products and their benefits to consumers.
Conducted by TNS on behalf of the Working Group, the consumer research is believed to represent a first attempt by the risk insurance sector to research the impact of product communication on Australia’s intractable under-insurance gap.
It is reportedly the last of three research projects planned by the group, and follows the release over the past 18 months of ‘Life Insurance Protection Gap — Families with Children’ and ‘Income Protection Gap — Self-employed and Small Business Owners’.
A commentary on the motivations for the research paper said life companies “produce a wide-range of collateral material to help support their own campaigns, yet little is known about how consumers assimilate the language in written communications”.
The results of the three research projects will now be discussed by the working group, which comprises various risk sector representatives, before being collated into a pending presentation it will make to the IFSA board on its under-insurance gap findings and potential recommendations.
Working Group member Gerard Kerr, also senior risk product manager at Asteron, said the latest research project had “clearly identified a need by industry leaders to communicate the benefits of life and related policies in language consumers can truly understand”.
“There’s no doubt there’s currently a disconnect between what we’re trying to communicate as an industry to end-consumers of life insurance products and how end-consumers are assimilating this information.
“In general, the consumer appears to have a reasonable understanding of what term life as a product means and offers, but they are less clear about trauma, critical illness and income protection.”
Kerr added that the research reveals the industry will also have to overcome a “prevailing perception by end-consumers that life insurance products will inevitably be too complicated to understand, and that there will also be accompanying fine print”.
~ Earlier last month, IFSA, in conjunction with the Australian Bankers’ Association (ABA) and the Insurance Council, also launched a ‘plain-English’ financial literacy booklet on insurance for consumers.
Entitled ‘Smarter Insurance — Protect Your Assets and Secure Your Future’, the free booklet provides consumers with practical answers to frequently asked questions about insurance.
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