Too many options can mislead DIY insurance customers
Published 02 October 2018
Consumers are bamboozled by choice when it comes to selecting an insurance policy, a recent study shows. Given all the relevant information, too many people still make bad decisions.
Following the Financial Services Royal Commission findings and Insurance Council of Australia (ICA) confirmation that exclusions and limits in policy statements are often poorly understood, online media publisher The Conversation, funded by the NSW Legal Rights Centre, conducted a survey among 406 randomly chosen participants across Australia.
The survey provided three home contents policy choices: good, okay and bad. Participants were also provided with legally required product disclosure statement (PDS) and/or a mandatory shorter two page key fact sheet outlining what each policy covered and did not cover. The bad policy, for example, completely excluded cover for fire.
The results showed that more participants (76.2%) made the best choice if they received only the short-form information but 9.5% picked the bad policy and 14% couldn’t choose at all. When the number of products to choose from increased the participants who picked the good policy declined to less than half.
Gallagher Manager, Corporate, Adam Sulway (pictured) says for most people the devil is in the detail: policy wordings. “Insurance products are largely homogeneous for their respective categories,” he says. “For example, home and contents insurance offered by the major domestic insurers provide similar cover across 80% to 90% of their respective product, however, it’s the 10% to 20% difference in cover that can catch consumers out and be problematic when a claim occurs.”
Sulway say this small percentage represents the gap between what consumers think they are covered for or expect the insurance policy to cover and what it actually covers, without necessarily having read and understood the wordings.