Investigating the Issue of Underinsurance in Australia Key Facts from TNS Research

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1 Investigating the Issue of Underinsurance in Australia Key Facts from TNS Research August 2005 TNS consultant: Gary Lembit August 2005

2 Introduction Background IFSA has identified the need in the industry to consolidate the differing levels of understanding around the issue of underinsurance in the Australian community IFSA commissioned Rice Walker to identify the cost of underinsurance through analysis of the insurance needs of the Australia public Further research was required by IFSA to gauge the attitudes and behaviors of Australian families in relation to underinsurance TNS was commissioned to undertake this research amongst Australian families Research was focused within the high risk group as identified by IFSA of Over 21 years of age At least one financially dependent child living at home Married or single 606 on-line interviews were conducted with a nationally representative sample in June/July 2005 This document provides a brief overview of some of the key themes emerging from the research 1

3 How long will current levels of life cover maintain income? Number of years of income covered by current life cover % Less than 1 year covered 1 to 5 years covered 6 to 10 years covered 10 years or more covered Rice Walker calculated that most Australians in the At Risk category would require at least 10 years of current income to ensure a family s lifestyle could be maintained in the event of the premature death of a parent. The result above clearly demonstrates the challenge faced by the industry and community in ensuring families are cared for in the event of premature death of a parent Base: All Source: 27/46 2

4 Profiles of Those Without Life Cover and Those with Inadequate Cover The profiles below indicate groups in the population are more highly represented within either the no life cover or the inadequate life cover group in a higher proportion than they are represented amongst Australian families with dependent children NO LIFE COVER INADEQUATE COVER Families with 5 or more children Women South Australian families Families with less than $30,000 household income Parents with less than $20,000 personal income Stay at home parents Divorced parents Families renting rather than owning Parents not working or working part-time, particularly with younger children Families in which a language other than English is spoken at home Families with between $50,000-$100,000 household income Parents with between $20,000-$50,000 personal income Parents who are employed full-time 3

5 Some Other Key Facts Only 40% of full-time workers in Australian families know that cover can be obtained via super and how much cover they personally have While not all parents could describe life insurance confidently, the majority recognise overtly or implicitly that the main purpose of life insurance is to protect the family The benefits of life cover are most often described in terms of how the surviving family benefit. 61% overtly mentioned a positive outcome for the family when asked about the benefits of life insurance Only 20% of those with no life cover agreed with the statement that I consider life insurance to be part of my general financial management. This compares to 39% of those with inadequate cover and 58% of those with adequate cover While the most common reason parents gave for not having life insurance was that it was too expensive, there were also many who feel life insurance is too complicated and a hassle to obtain Finally a key issue is the extent to which people feel life cover is relevant to them. In responding to the statement I can see a strong benefit in life insurance for me, only 42% of those with no life cover agreed with the statement, 62% of those with inadequate cover and 80% of those with adequate cover. Being in a position to clearly articulate and demonstrate the benefits is likely to have a very positive effect on family perceptions of the importance of life insurance for the family 4

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