Nearly half of respondents in a new survey about risk insurance provided by superannuation funds found it hard to get independent advice.
The Australian Institute of Superannuation Trustees and Industry Funds Forum commissioned the survey, by Sweeney Research, to look into fund members’ attitudes to insurance provided by their funds.
The survey spoke to 2,402 industry fund members and found 49 per cent said it was difficult to understand the amounts of cover being provided. It also found 45 per cent said buying risk insurance “was overwhelming”.
Sweeney Research chairman David Barmer said the younger the member, the more overwhelming they found making decisions about their cover.
Despite finding insurance very hard to understand, 35 per cent of people surveyed found the advice given by the funds was “excellent”, Barmer said.
“Only 10 per cent said the advice given by the fund was poor,” he told an AIST conference in Melbourne.
“We found that four out of 10 members sought advice at the time they wanted to change their cover and this was mostly from family, friends and colleagues.”
The advice given in the general media about insurance was rated poor by 33 per cent of those surveyed.
According to Barmer, although all funds provide life cover, 8 per cent of those questioned thought it was not available, and in the under 31 age group, only half knew they were insured.
“There obviously needs to be a lot more education done with members on what insurance is provided,” Barmer said.
“We also found few could accurately estimate the amount of cover they had with the fund.”
The estimates of the amount of cover members had in TPD and income protection were also poor.
This part of the survey also highlighted the considerable number of members who are underinsured.
The survey found the average life cover is $189,000 per member when most should have about $500,000.
“We also found that 21 per cent of those surveyed did not need life cover for a variety of reasons,” Barmer said.
“Also 15 per cent are overinsured by $100,000 or more.”
For TPD cover, only 4 per cent are overinsured while 71 per cent are underinsured by $100,000 or more, while for income protection the figures were 12 per cent were overinsured and 45 per cent underinsured.
Industry Funds Forum executive officer Helen Hewitt told the conference the survey was the first to look at what is driving member’s views on insurance.
“We can now see what the barriers are to members making decisions about insurance,’ she said.
“This is the first piece of research to look at these issues.”
Hewitt said the overall objective of the survey was to examine more closely the views held by members about insurance and what will make members take a more active role in this decision-making process.
