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<p>Underinsurance and low financial literacy have been shown to be key issues impacting the effectiveness of personal financial management. Both issues are made more important by the complex financial system, an ever moving array of financial products and services, and the progressive move towards self-reliance in retirement. These factors suggest a greater degree of financial independence and more effective financial decision-making is required over the long-term, both of which may be undermined by low financial literacy and underinsurance. Little is known, however, about the impact of financial illiteracy on the propensity to seek and retain insurance.</p>
<p>Using an interview methodology, we obtained the views of informed and non-informed participants to examine insurance literacy in Australia. We find evidence that insurance literacy of consumers is generally low and exacerbated by factors such as low product knowledge, low trust of providers, low awareness of risk mitigation strategies, and behavioural decision-making biases. These factors can culminate in a perception of low value and subsequent underinsurance. Furthermore, this appears to be more acute for personal insurances as opposed to general insurances.</p>
</abstract>

Underinsurance and low financial literacy have been shown to be key issues impacting the effectiveness of personal financial management. Both issues are made more important by the complex financial system, an ever moving array of financial products and services, and the progressive move towards self-reliance in retirement. These factors suggest a greater degree of financial independence and more effective financial decision-making is required over the long-term, both of which may be undermined by low financial literacy and underinsurance. Little is known, however, about the impact of financial illiteracy on the propensity to seek and retain insurance.
Using an interview methodology, we obtained the views of informed and non-informed participants to examine insurance literacy in Australia. We find evidence that insurance literacy of consumers is generally low and exacerbated by factors such as low product knowledge, low trust of providers, low awareness of risk mitigation strategies, and behavioural decision-making biases. These factors can culminate in a perception of low value and subsequent underinsurance. Furthermore, this appears to be more acute for personal insurances as opposed to general insurances.

Insurance Literacy in Australia: Not Knowing the Value of Personal Insurance

Financial Planning Research Journal

This work is licensed under the Creative Commons Attribution 4.0 International License.

{"article-title":"Insurance Literacy in Australia: Not Knowing the Value of Personal Insurance"}

Underinsurance and low financial literacy have been shown to be key issues impacting the effectiveness of personal financial management. Both issues are made...

Informed Participant	Consumer
Consumer perceptions of insurance
In your opinion, do Australians think that personal insurance is valuable and important?	Do you think that personal insurance is valuable and important?
Do you think Australians have adequate knowledge of personal insurance products?	How much do you know about personal insurance products?
Do you think that people perceive personal insurance products differently to general insurance products, such as house and contents insurance?	When considering personal insurance products and general insurance products, such as house and contents insurance, how do you perceive them both? Are they similar or different and which type would you be willing to purchase first?
Drivers of consumer decision-making
What factors do you think make a person to be self-driven to purchase personal insurance products?	What would make you self-driven to purchase personal insurance products?
In your opinion what drives or influences people to purchase personal insurance products?	Please tell me what drives or influences you to purchase personal insurance products?
What factors do you think make a person cancel their existing personal insurance products?	If you have personal insurance, what factors would influence you to cancel your existing personal insurance products?

Insurance Literacy in Australia: Not Knowing the Value of Personal Insurance

Published Online: Mar 19, 2024

Page range: 53 - 75

Received: Mar 31, 2017

Accepted: Nov 27, 2017

DOI: https://doi.org/10.2478/fprj-2018-0003

© 2018 Tania Driver et al., published by Sciendo

This work is licensed under the Creative Commons Attribution 4.0 International License.

Discussion Guide Questions