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The underinsurance problem in Australia is the issue most heard about, but overinsurance has also been identified as a concern and points to a lack of awareness, said Macquarie Adviser Services’ head of insurance Justin Delaney.
“Generally there is a distinct lack of awareness about insurance within the community, which means that if you don’t seek advice or get the right product for your needs there is a chance you will be either under or overinsured,” he said.
He agreed that underinsurance is the bigger issue, but added that overinsurance also becomes a problem when the product is not catered to specific needs.
Delaney said research conducted by industry funds in 2008, which involved an online survey of 2,000 members and a full means analysis of about 620 members, found that 39 per cent were overinsured to some degree and 16 per cent were over-insured by $100,000 or more.
“The reality is that it is not money wasted — there is still value should something happen to that individual — but it’s more about where else that money can be directed,” said Delaney.
He said a younger person without dependants, for example, would be better off investing that money in trauma and disability insurance or income protection — thus more cleverly using that money and directing it to more specific needs.
Delaney felt that the problem is due to a lack of awareness and engagement rather than apathy.
“I’m not sure that if you spoke to 10 people on the street that they would be fully aware of the range of insurance options available to them,” he said.
“Campaigns such as Lifewise are a good start in trying to increase that awareness and engagement in the community, as well as the increasing availability of insurance through superannuation,” he said.
He said Macquarie has been tackling the under and overinsurance issues by seeking to provide more advice through more efficient processes, such as utilising online tools.
