According to a new study by the Association of Financial Advisers (AFA) and BT, Australians don’t trust life insurance companies. The study suggests the primary reason for this lack of trust is because Australians find Life Insurance too confusing
The report, based on research by the Beddoes Institute, did in-depth interviews with 10 insured Australians aged 32 to 46. Its main finding: a “significant” lack of understanding about life insurance products.
“Public perceptions of the insurance industry are overwhelmingly characterised by a lack of trust,” the report says. “This is driven by a belief that insurance products lack transparency, a view that insurance companies are too focused on the dollar and the adversarial attitude of insurance companies towards paying claims, [which] is a legacy of the past…The underinsurance problem in Australia is undoubtedly complex and multifaceted, with the lack of trust of the insurance industry being a significant contributing factor.”
John Brogden, CEO of the Financial Services Council (FSC), says the life insurance industry itself is to blame for this prevailing perception among Australians.
A separate FSC study found that the financial services industry – which includes life insurers – had a minus-17 percent rating on a “favourability spectrum.” By contrast, the mining industry had a plus-19 percent favourability spectrum rating. When the study looked specifically at financial services, life insurance in particular had a “neutral” rating.
“The industry doesn’t have a trust problem; it is a reality issue,” Brogden says. “We don’t have a clear strategy in people’s minds. People see life insurance as discretionary, and we have to move that to a