New consumer research has provided an insight into how consumers buy insurance, and some of the trends revealed by the research are worrying.
The study, carried out by two research firms, The Lab and Nature, was commissioned as a key recommendation of the Insurance Council of Australia’s (ICA) Effective Disclosure Taskforce.
This recommendation was made after the taskforce observed that there was little evidence concerning how consumers made decisions when it came to purchasing insurance.
ICA CEO Rob Whelan said the research would help insurers to better serve customers when it came to finding the most suitable policy for their needs.
“Insurers want to make the policy information they provide clear, simple, and easy to navigate. The Product Disclosure Statement (PDS) is the key means of doing this. Unfortunately, many customers find these legal documents too long and complex,” Whelan said.
And he’s not wrong; one of the key revelations of the research is that most of us aren’t paying enough attention to the finer points of our policy documents.
Not reading the PDS before purchase: A widespread problem
According to The Lab and Nature’s research, a vast majority of customers (roughly 80%) don’t read the legally mandated PDS before purchasing the attached insurance policy. That’s despite high levels of consumer confidence when it came to understanding one’s policy, with 88% saying they were confident they understood the detail of their policy.
Actual understanding of policy exclusions and limits was found to be generally poor.
As Mr Whelan suggested, this issue is most likely due to the fact that most consumers find their PDS to be too complex, and subsequently don’t go over it as thoroughly as they should. One of the goals of the research was to discover ways of better communicating crucial policy information to consumers, in a form they can easily digest.
Mr Whelan said, “Presenting information that is more engaging, useful and relevant requires a better understanding of how customers use insurance documents and other information sources at the moment. This is what this research provides.
“The PDS will remain central to policy disclosure, but insurers are developing innovative methods to make them easier to search and digest.”
Minister for Revenue and Financial Services @KellyODwyer addresses @ICAUS Annual Forum https://t.co/7Ql1QN1Il8 #insurance
— Insurance Council (@ICAUS) February 16, 2017
Other bad insurance shopping habits
Not reading the PDS isn’t our only flaw when it comes to shopping for insurance. The research also revealed a few other nasty habits we have, including:
- Focusing most on price when buying insurance, rather than paying attention to policy detail
- Not looking into policy exclusions and limits, despite thinking that all details had been considered
- Not considering the specific risks that required cover when purchasing insurance
Mr Whelan stressed that, when looking for an insurance policy, it is crucial to understand the features and details of a policy, rather than just focusing on price.
“Customers are exposed to dozens of brands offering multiple policies that differ on price and features. Finding the most appropriate one can sometimes be challenging,” he said.
“If a customer doesn’t understand a policy’s exclusions and limits or buys the wrong level of cover, they can end up financially devastated. For insurers, these situations create angry customers, bad publicity and costly disputes. It’s in everyone’s interest to avoid misunderstandings.”
Industry experts predict a 4% hike in home and car insurance this year. @olivialeeming #7News pic.twitter.com/hiwUIkZwQI
— 7 News Sydney (@7NewsSydney) February 2, 2017
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