Mind the gap!

Mind the gap!

When it comes to personal protection, Australians are making a worrying return to a ‘she’ll be right’ approach, with fewer than one in five checking their levels of personal insurance.

BT’s Australian Financial Health Index1 (AFHI) found that overall, the nation’s financial wellbeing has remained relatively stable. However after positive shifts in attitudes towards insurance in 2012-2013, the more recent 2014 AFHI found an uplift in levels of confusion and indifference in regards to personal protection. See the infographic here.

We’re more likely to insure our car than ourselves

As a guide to how personal insurances often play second fiddle to other types of cover, 76% of Australians claim to insure their car, yet only 33% also claim to have life cover and just one in five (20%) claim to have income protection insurance.

Indeed, tangible assets are typically seen as more worthy of insuring than ourselves.

One in three (35%) Australians rate their home as their most important insurable asset compared to just 26% who rate life insurance as the most important form of cover. Protection against loss of income (11%), total and permanent disability (10%) and chronic illness or injury (9%) all rank poorly as insurable priorities.

A lack of confidence in personal insurances

The AFHI highlights how a lack of confidence in personal insurance products is a key factor behind significant levels of underinsurance.

Around one-third (31%) of Australians are ‘very confident’ their car insurance will meet their financial needs if a claim is lodged. By contrast, just 20% are confident that life cover will meet their financial needs – a figure that falls to 14% for total and permanent disability (TPD) insurance.

This level of uncertainty highlights important gaps in knowledge – gaps that create opportunities for financial advisers to engage with clients.

Through the use of simple case studies coupled with straightforward conversations, advisers can highlight the way that life insurance and other forms of personal cover play a valuable role in household financial security.

Australians are relying on the internet to provide answers

The AFHI research also found that Australians are increasingly turning to the internet (80%) and family or friends (73%) when it comes to making decisions on insurance. Only 34% would speak with a financial adviser.

This further underpins the need for client education. The type of cover that is needed, and the amount of cover that can be regarded as appropriate are highly personal issues, and financial advisers are well-placed to leverage their in-depth knowledge of each client’s circumstances to explain the level and type of cover that is right for individual clients.

Reminding clients of the need for a review of personal insurance cover – at least annually, is a key stepping stone to ensure your clients enjoy tailored protection from life’s curve balls.

 

Information current as at 16 November 2015. © BT Financial Group – A Division of Westpac Banking Corporation. This document provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such. This information is sourced from the BT Australian Financial Health Index 2014 (a nationally representative research study of 4,450 Australians aged 18+) and does not constitute financial advice. Before acting on this information, your clients should consider its appropriateness having regard to their objectives, financial situation and needs.