Brokers can aid growing underinsurance problem

by Julia Corderoy11 Feb 2016
Australian consumers are vastly underinsured, the results of a new survey have revealed, and brokers should bear some of the responsilbity. 

According to Mortgage Choice’s inaugural Financial Confidence survey, over one in every five Australians don’t feel it is important to insure their vehicle. 

When respondents were asked whether or not they had a form of car insurance, 21.6% of Australians said ‘no’. 

Of those surveyed in New South Wales, one in every three respondents said they did not have compulsory third party insurance. However, in New South Wales, compulsory third party insurance is not included in a vehicle’s registration fee and must be purchased separately. 

Mortgage Choice chief executive officer John Flavell said he was shocked about the blasé attitude to insurance.   

“It is clear many Australians take a laissez-faire attitude towards insurance. They do not consider insurance to be essential and as such, don’t think about insuring their vehicles or other assets,” Flavell said. 

“It really makes you wonder how many Australians don’t have the right insurance policies in place for their personal situation.”

According to Flavell, research conducted by the Financial Services Council also shows that just 31% of Australians have adequate income protection. 

“While the majority of superannuation funds offer some level of income protection cover, this cover is often not adequate,” he said.  

“In the same way that it is important for Australians to properly insure their vehicle in the event that unforeseen circumstances arise, it is also vital for Australians to properly insure their income.

“There is a growing trend of underinsurance in Australia, which is simply not good enough. More education is needed to reverse this trend immediately.”

Flavell told Australian Broker that the responsibility of proper education also falls on brokers, who are in a position to help in a myriad of ways.  

“Brokers need to be constantly educating their clients on the value of insurance and there are a couple of ways they can do this. In the first instance, they can have conversations with their clients about the real need for adequate insurance and explain the risks associated with not having the proper cover. 

“Alternatively, if brokers do not want to discuss insurance options with their clients directly, they can speak to them about the benefits of seeking financial advice. From there, they can refer their clients to a trusted financial adviser who is perfectly positioned to teach those customers about the value of insurance.

“Finally, a great way to help educate clients on the value and need for adequate insurance protection is through blogs, newsletters and social media posts. Brokers can use their various client touch points and communication platforms (including their website, social pages etc) to espouse the value of adequate insurance protection.”