Underinsurance - we’ve only got ourselves to blame
The life insurance sector has contributed to the underinsurance of Australians by over-engineering products so that they are poorly understood by customers, according to Jim Minto, chief executive of Tower.
Speaking at the annual Investment and Financial Services Association (IFSA) conference, Minto said: “We know as an industry that over time risk like this does result in adverse experience and the question I ask is who will pick up the bill for these uninsured risks?”
Increased mortgage and credit card debt has resulted in a “significant deterioration” in insurance coverage, said Minto.
He added that the use of jargon and “confusing technical terms designed for specialists rather than consumers” is failing to encourage consumers to take out cover.
“This has become an industry where technical expertise is more valued than explaining benefits to consumers,” said Minto.
Products need to be simplified, and a co-ordinated marketing approach developed to highlight the importance of insurance, he said.
He added: “We must improve accessibility to the means of buying these products. We need to make these solutions more easily available to consumers.”
Currently there are 5.3 million Australian families with dependent children, but the cover held is only 20 per cent of what is required.
According to Minto, 66 per cent of families do not have enough cover to replace their income for more than one year.
With a report released recently by IFSA showing underinsurance now totals $1.3 trillion, Minto said: “this is a huge social policy issue for Australia”.
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