Underinsurance remains a significant issue in Australia, especially when looking at data in the personal insurance space*.There are many reasons for why underinsurance persists^. For example, our behavioural decision-making biases (optimism bias) can influence the value we attach to insurance, and the need to seek and retain it.
Importantly, underinsurance doesn’t solely impact you (and your family), it also impacts others. For example, the social and economic costs of social security payments due to underinsurance#.
In this animation, we illustrate underinsurance in the personal insurance space. Though, underinsurance is also present in the general insurance space. For example, 83% of homeowners and renters are underinsured for their home and contents^*.
*Rice Warner. (2017). Underinsurance in Australia 2017.
^Driver, T., Brimble, M., Freudenberg, B., & Hunt, K. (2018). Insurance Literacy in Australia: Not Knowing the Value of Personal Insurance. Financial Planning Research Journal.
#Rice Warner. (2017). Superannuation: Assessing Competitiveness and Efficiency. Submission to Productivity Commission – Insurance Aspects.
^*Quantum Market Research. (2013). The Understand Insurance Research Report.