KGI Blog | Why Some People Just Hate Insurance
Published by Christina Chua, 19 July 2020
After all these years working in the financial services sector, I have come to realize that there are a group of consumers who avoid insurance entirely and think that they do not need it.
Their lack of interest in insurance could be due to the invisible and intangible nature of the product. Unlike a tangible asset, e.g. a house, a car, or the latest designer handbag – insurance merely gives you a booklet called the insurance policy, which doesn't seem exciting and worthwhile, until the need to claim arises.
Many people forgo insurance, preferring investments such as investing in stocks or their own business, where there is an opportunity for them to make money and potentially improving their quality of life.
In contrast, insurance is a relatively dull topic and in the Asian culture, talking about insurance – especially in front of the older generation can also be a taboo as it tends to centre on negative things such as death or illnesses.
Sometimes, consumers' negativity towards insurance could also be due to bad past experiences, such as a lack of service from their previous agent, issues with a past claim, or being mis-sold an insurance product that did not suit their needs.
That being said, every individual needs to get sufficient insurance cover, and here is why:
1.) Insurance safeguards your loved ones:
When life is smooth, people can become complacent, especially in areas of health and financial security. However, life is extremely unpredictable, and we must be adequately prepared to deal with contingencies in life. For instance, life insurance plans protect our family and their financial needs, in the event of our untimely and unfortunate demise. Our family should not be left to struggle when we are no longer around, and life insurance plans will safeguard their financial interests in such situations.
Separately, having a medical insurance policy would also ensure that our expenses incurred from hospitalization and treatment of health conditions are well-covered. With rising healthcare costs and higher critical illness occurrence, it is imperative to have medical insurance coverage to prevent unnecessary financial stress on oneself and the family.
2.) Insurance provides a safe way to grow your money
Savings insurance plans offer a secure avenue for customers to grow their wealth. Although the returns are less attractive as compared to other instruments such as stocks, such savings insurance plans are usually capital-guaranteed upon maturity and have a significantly lower risk compared to investment. The regular payment of premiums enables disciplined and systematic savings. Depending on the type of savings plan purchased, the insured will get a lump sum amount (principal + non-guaranteed bonuses) at the point of policy maturity, or receive cashback over a certain number of years throughout the policy term.
3.) Insurance gives you peace of mind
No amount of money can substitute your wellbeing and health; however, you can at least have a peace of mind knowing that even if a mishap happened to you, your family's financial security is protected by insurance. Having adequate insurance coverage can ensure that you can live your life tension-free and allows you to focus on the greater things in life.
4.) Insurance manages your risks
Insurance is a useful risk management tool in life, as it operates on the basis of the transfer of financial risk from the life assured to the insurer. Such risks include the risk of falling sick, risk of damaging your car, risk of meeting with an accident, risk of untimely death and more, which can be managed with a relevant insurance policy.
Regardless of the type of risk, the importance of insurance should be understood by all. Instead of fixating on the extra budget that you will need to set aside for the insurance premiums, look at the big picture of protecting and safeguarding your family's future.
Financial advisers should also make an effort to understand their customers and their underlying needs before they recommend an insurance product to the customer. Product features and other marketing messages will not result in a purchase if they do not resonate with the buyer. Client education is also essential to clarify the misconceptions that a client may have regarding insurance.
Tell me, do you believe in insurance, and why?
