understand car insurance report

Prepared by Quantum Market Research for Understand Insurance

June 2014

Understand Insurance Motor Research Report

Background to this report

Understand Car Insurance Research ReportJune 2014

To better understand consumer attitudes around their car insurance, Understand Insurance commissioned Quantum Market Research to conduct a national online

survey of more than 1000 people.

The results of the survey form a key part of Understand Insurance, the ICA’s national consumer campaign aimed at empowering consumers to make better,

more informed decisions by demystifying insurance.

The research project focused on uncovering attitudes towards car insurance, with specific focus on potential exposure to financial loss.

Research methodology & sampling


Total sample: n=1017 Car owners

• Before taking part in this survey, respondents were screened to ensure they were:

―Australian residents.

―Aged 18+.

―Owners of a car which was registered (independently or joint-ownership).

―Not on a learner’s permit.

• The survey was conducted in May 2014.

• All respondents completed the survey online.

• Each respondent took 6-8 minutes to complete the survey.

• A nationally representative sample was obtained (based on gender, age and location).

• Respondents were sourced from an ISO accredited market research panel which is considered among the highest quality in the industry (Survey Village).

―This panel is carefully managed to ensure respondents are representative of the total population and are not ‘over-researched’.

A nationally representative sample


Location: % of sample: Location: % of sample:

Sydney 18%Regional NSW

9%

Melbourne 17% Regional Vic 6%

Brisbane 9% Regional Qld 12%

Perth 10% Regional WA 3%

Adelaide 7% Regional SA 3%

Hobart 1% Regional Tas 2%

ACT (Canberra)

2% NT 1%

Age: % of sample:

18-24 9%

25-29 15%

30-39 21%

40-49 20%

50-64 18%

65+ 18%

Gender: % of sample:

Male 49%

Female 51%

Sections of this report


Understanding of insurance

Potential exposure to financial loss

Additional data

Summary of key findings

Summary of key findings

Top 10 findings from this research


1.Almost one in five car owners (17%) use general knowledge, without consulting another source, to understand what

their policy covers.

2.More than one in five car owners (21%) risk not having the insurance they need because they don’t look at their policy

document at all. And more than half (59%) acknowledge that they don’t understand all the details in their policy document.

3.Younger drivers (those aged 18-29) are especially vulnerable to significant financial loss because, compared to the average car owner, they’re much less likely to read and understand their policy document (34% don’t look at their

policy document at all, compared with 21% of all Australians).

4. Around one in six (15%) not covered state they ‘prefer to take risks’ than insure their car against a total loss scenario.

5.Around one in five of those with third-party only insurance wrongly believe that they are covered against damage

caused by an uninsured driver (21%) or accidents which are their fault (20%).

Top 10 findings from this research


6.Less than two-thirds of car owners (60%) compared their policy with other insurers’ policies before renewing this year.

However, those who did are significantly more likely to perceive they are clear on what is and isn’t covered by their policy.

7. More than one in ten (12%) of car owners say they’ve knowingly misrepresented details to their insurer.

8.Most (61%) car owners leave valuables in their car. Of these, only a third (35%) know whether their policy covers them

against theft.

9.Higher-income individuals (household income >$150k) are leaving themselves exposed to financial loss. The majority

(74%) leave valuables in their car, yet less than half (48%) know whether their policy covers them against theft.

10.Independent websites about insurance (including Understand Insurance) form an important source of information

available; a quarter (25%) consult these sites for information about their insurance and cover.

Understanding of insurance

Almost one in five car owners (17%) use general knowledge, without consulting another source, to understand what their policy covers


Sources of information used to understand policy coverage:

Q17 Base: All (n=1017)

37%

32%

27%

25%

15%

11%

17%

0% 50%

Read policy document

Insurer's website

Insurer by phone

Other websites aboutinsurance

Insurance comparisonwebsites

Spoke to relative / friend

None of the above, I just usemy general knowledge

Note: Mentions <5% shown in slide notes.

• Only a third (37%) consult their policy document as a source of information about what their policy covers.

• Other websites about insurance (including Understand Insurance) form an important source of information available; a quarter (25%) consult these sites for information about their insurance and cover.

• Almost one in five (17%) who select “None of the above, I just use my general knowledge about insurance” are at risk of unknowingly exposing themselves to significant financial loss.

• They are significantly more likely to come from low-income households (20% of those from households with <$50k p/a).

More than one in five car owners (21%) risk significant financial loss because they don’t look at their policy document at all


Reading policy document:


21% Agree – “I don’t look at my policy document at all”

45% Agree – “I only check

my contact and vehicle details are correct”

Those who don’t look at their policy document are more likely to:

• Be younger drivers (34% of those aged 18-29).

• Have third-party only insurance (41%).• Leave valuables in the car (24%).

Those who only check contact and vehicle details are correct are also more likely to:


• Have third-party only insurance (60%).

Note: These agreements are from separate questions, i.e. they aren’t part of the same scale so can’t be added together.

Potential exposure to financial loss

Those with third-party cover are more likely to be exposed to potential financial loss


20% Be much worse

off and really suffer

Q21 Base:Those with third-party only or third-party fire & theft cover who say they are ‘definitely not covered’ against one or more incidents (n=99)

“In an accident which was later deemed to be my fault, due to my financial setback I would...”

40% Be worse off and suffer quite a bit

29% Be worse off but not really suffer

11%

89% of car drivers with third-party insurance cover are exposed to significant financial loss.

*n.b. Respondents were asked to exclude any personal injury to ensure their consideration was purely financial in nature.

Resume at least the same standard of living I have now

More than 90 per cent of car owners with comprehensive insurance don’t know what value their car is covered for


If your car was written off, which best describes your level of cover:

Q15 Base: Those with comprehensive insurance (n=850)

49%

Cover based on the market value

21% Cover based on an agreed value approximately the

same as market value

20% Cover based on an agreed value higher than market

value

9% I don’t know

how much I’m covered for

Those whose cover was based on an agreed value are more likely to:

• Drive a car with a value of >$20k.• Perceive they have a clear understanding of their

policy document.

Those who didn’t know how much they’re covered for are more likely to:

• Be younger drivers (16% of those aged 18-29).• Be female (14% females vs. 5% of males don’t

know how much they’re covered for).

62%

46%

21%

20%

12%

10%

9%

34%

40%

55%

32%

38%

43%

44%

4%

13%

24%

49%

50%

48%

48%

0% 100%

Damage to someone else'sproperty

Damage to own car if not at fault& other vehicle insured

Damage to own car if not at fault& other vehicle uninsured

Damage to own car if at fault

Damage or loss by theft

Damage or loss by fire

Damage or loss by vandalism

Definitely covered Unsure Definitely not covered

Knowledge of coverage – Third-party only


Perceived coverage for incidents:

Q19 Base: Those with third-party only cover (n=82)

• Despite being covered, a high proportion of those with third-party only insurance are either unsure or perceive they definitely aren’t covered for these incidents.

• Around one in five of those with third-party only insurance wrongly believe that they are covered against damage caused by an uninsured driver (21%) or accidents which are their fault (20%).

68%

42%

29%

23%

81%

82%

24%

23%

39%

48%

19%

16%

18%

56%

10%

19%

23%

58%

19%

0% 100%









Knowledge of coverage – Third-party fire and theft



Q19 Base: Those with third-party fire and theft cover (n=62)

• Despite being covered, around four in five of those with third-party fire and theft insurance are uncertain about their coverage against fire / theft.

81%

87%

80%

86%

87%

81%

72%

17%

11%

19%

12%

12%

18%

27%

0% 100%









Knowledge of coverage – Comprehensive



Q19 Base: Those with comprehensive cover (n=850)

• Analysis shows that car owners with comprehensive insurance have significantly more certainty of what their insurance covers.

• Results may imply that some of those with comprehensive coverage falsely perceive they are covered for everything. Collisions with uninsured drivers and vandalism are not always covered so we would expect to see a higher percentage who say they’re ‘definitely not covered’ for these incidents.

Those who compared and switched are more likely to:


• Although car value has no influence, they are more likely to come from high-income households.

Less than two thirds of car owners (60%) compared their policy before renewing this year


Comparing insurers:


22% Compared insurers, then took out a policy with a

different insurer

38% Compared insurers, then renewed policy with

the same insurer

34% Did not compare insurers, then renewed

policy with same insurer

3% First time

purchasing insurance

3% Policy arranged

by someone else

Those who compared but did not switch are more likely to:

• Have cars with high value (46% of those with cars worth $20k – 40k) or very high value (65% of those with cars worth >$40k).

• Have comprehensive level of cover (40%).

Those who renewed without comparing are more likely to:

• Be older drivers (44% of those aged 50+).

Those who don’t compare before renewing are more likely to be ‘unsure’ what their policy covers


% who are ‘unsure’ whether incident is covered by their policy:

Q16 & Q19

27%

21%

18%

16%

14%

13%

13%

33%

26%

20%

23%

15%

17%

13%

0% 50%


Damage to own car if not at fault &other vehicle uninsured


Damage to someone else's property


Damage to own car if not at fault &other vehicle is insured


Compared insurers this year(n=609)

Did not compare insurers this year(n=349)

Around one in six (15%) not covered state they ‘prefer to take risks’ than insure their car against a total loss scenario


Why not insure against damage / loss of your car:

Q20b – 20f Base: Those who say they are ‘definitely not covered’ against one or more incidents (excluding damage to third-party property) (n=259)

54%

48%

15%

12%

8%

7%

6%

4%

6%

0% 100%

It's too expensive

Car value is low so not worth it

Prefer to 'take the risk'

Perceive risk of needing to claim…

Insurers don't pay out enough

Perceive financially secure…

Just didn't think about it

Uncertain whether needed

Other

Of those who say ‘car value is low so not worth it’:

• 45% could be considered at financial risk*.• Own a car with average value of $3,558**.

Those who say they ‘prefer to take risks’:

• Are more likely to be male (19% males vs. 11% female).

• Although less likely to be 65+, these car owners are spread across all age groups.

*Less than two months pay in savings, or credit card debts equal to more than two month pay, or have difficulty paying household bills.** Calculated by taking a mid-point from every response selected, e.g. $1,000 – $3,000 = assumed value of $2000.

More than one in ten (12%) of car owners say they’ve knowingly misrepresented details to their insurer


Details misrepresented in the past five years:

Q22a – Q22b Base: All (n=1017)

There are 13,000,000 registered passenger vehicles in AustraliaSource: 2013 Motor Vehicle Census available free from www.abs.gov.au

Misrepresentation % of sample:Equivalent number of vehicles:

Where vehicle is kept overnight 6% 780,000

Value of vehicle 6% 780,000

Average distance driven 4% 520,000

Speeding infringements 3% 390,000

Having alarm / immobiliser 3% 390,000

Vehicle modifications 3% 390,000

Age of youngest driver 2% 260,000

Non-speeding infringement 2% 260,000

Loss of licence 2% 260,000

Previous accidents 1% 130,000

Drink driving convictions 1% 130,000

Overall, 12% of car owners misrepresented one or more of these details, they tended to be:

• Younger drivers (23% of those aged 18-29).• Urban dwellers (16% of those living metro, vs. 4%

regional).• High value car owners (25% of those with a car

worth $40k+).

The majority (61%) of car owners leave valuables in their car. Of these, only a third (35%) know whether their policy covers them against theft


Valuables left in car:


61%Leave valuables in

their car(12% very often, 49%

occasionally)

39%Never leave valuables

in their car

Whether insured for theft of valuables:

54% Are unsure whether they

have coverage

13% Know they don’t have coverage

35% Know they have coverage

(22% on home contents,13% as part of car policy)

Those who leave valuables in their car are more likely to:

• Have high household income (74% with household income >$150k).• Drive a car of very high value (77% of those whose car is worth $>40k). In the

majority of cases (42%) this is sports equipment (which those with lower value cars are significantly less likely to leave).

• See Slide 30 for detailed breakdown.

Q26 Base: Those who do leave valuables in their car (n=625)

Additional data

Ownership of car


87%Own a car

independently

13%Joint

ownership

Car ownership:


Car finance:


88%Car is paid for in full

12%Makingfinance

repayments

Type and current value of car


Type of car:


44%

25%

16%

7%

4%

1%

1%

0% 50%

Sedan

Hatch

SUV

Wagon

UTE

People mover

Cab chasis

Approximate current value of car:


22%

23%

31%

18%

4%

2%

0% 50%

Very low (<$5k)

Low ($5-10k)

Medium ($10-20k)

High ($20-40k)

Very high (>$40k)

Don't know

Age of car


Approximate age of car:


20%

19%

32%

29%

0% 100%

Less than 3 years

3-5 years

5-10 years

More than 10 years

• On average, older people (those aged 50+) are more likely to own a car which is more than ten years old.

• Those aged 25-29 are significantly less likely to own a car over ten years old (only 17% of them).

Frequency of car use


How frequently do you use your car:


65%

25%

9%

1%

0% 100%

Every day (or nearly every day)

3-5 days per week

1-2 days per week

Less often

• Note: There was no significant correlation between the frequency with which car owners’ used of their car and their perceptions of their reliance on their car.

Uses of car


Which do you use your car for:

Q9 Base:All (n=1017)

90%

79%

66%

53%

42%

21%

17%

1%

0% 100%

Shopping trips / domestic errands

Recreational / social activities

Holidays / weekends away

Commuting to / from work

Driving 'just for fun'

School run

Business purposes

None of the above

• Note: There was no significant correlation between car owners’ use of their car and their perceptions of their reliance on their car.

Reliance on car


Which of the following best describes how much you rely on your car?:


76%“I am absolutely reliant on my car, without it I would

struggle considerably”

22%“I am only somewhat

reliant, I could probablylive without it”

1%“I don’t really need my car”

Valuables left in car


What items do you leave in car:

Q24 Base: Those who say they do leave valuables in car (n=625)

Misrepresentation% of sample (total):

% of those with household income >$150k (n=61)

Food shopping 47% 49%

Retail shopping 44% 52%*

Clothing 42% 54%*

Mobile phone 32% 41%

Electronic goods 28% 33%

Handbag / purse / wallet 26% 30%

Tools 24% 18%

Sports equipment 23% 38%*

Cash 15% 11%

Credit / debit card 9% 13%

Jewellery 4% 10%*

GPS 3% 2%

* = significantly more than rest of population

Prevalence of ‘dash-cams’


Have ‘dash-cam’ fitted:


93%Do not have a

‘dash-cam’ fitted

7%Have a ‘dash-cam’ fitted

Planning to install a ‘dash-cam’:

Q28 Base: Those who do not currently have a ‘dash-cam’ fitted (n=822)

• Of those car owners who do not currently have a ‘dash-cam’ fitted, more than one in eight (13%) say they intend to fit one in the next twelve months.

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