Australians Don't Trust Life Insurers

June 30th, 2010

Australians don’t trust life insurance companies to pay at claim time stopping them from purchasing insurance, one of Australia’s largest life insurance brokers said today.

According to the Lifebroker Life Insurance Report, 67 per cent of respondents said they believe insurers will use loopholes to avoid payouts.

A further 58 per cent or respondents incorrectly believed premiums for life insurance products were much higher than car and home insurance, contributing further to a lack of trust that consumers feel toward life insurance products and the institutions that sell these products.

Life insurance products include life, income protection, trauma and total and permanent disability insurances.

Lifebroker said the results provided another clear insight into the obstacles that stop consumers from taking out life insurance products to protect themselves and their families.

“The fact is life insurance companies are legally obliged to pay claims and as quickly as possible and most life insurance policies cover a wide range of common events that can occur to a person, including the most common injuries and medical conditions.”

“Life insurance companies pay millions of dollars in claims to thousands of Australians each year.”

“According to the Australian Prudential Regulation Authority, the Australian life insurance industry paid $3.9 billion in death and disability claims in the twelve months to March 2010 , while CommInsure – one of Australia’s thirteen big life insurers – paid $60.7 million in total claims in 2009.

“Many people would be in financial ruin if they didn’t have an insurance policy and insurers didn’t pay claims.”

Lifebroker said the research findings are a clear signal to the insurance industry that it must do more to build trust with consumers.”

“As an industry we need to raise awareness of the amount of money we pay out each year, our legal obligations to pay claims, as well as the rights of consumers. Consumers need a better understanding of the professionalism within the industry.”

“We also need to encourage consumers to contact insurance brokers or advisers before buying an insurance policy so they have an opportunity to discuss the policies on offer and understand what they are insured for and the obligations on the insurer to pay at claim time.”

“Consumers should always read an insurance policy before purchasing, including reading the ‘exclusions’ section so they understand what events they are not insured for.”

Lifebroker said other obstacles to buying life insurance include misconceptions surrounding the actual and perceived costs of life insurance, and a lack of understanding about how life insurance works.