Regulators Cite Major Gaps in Consumer Understanding of Insurance

More than a third of Gen Z adults buy protection plans for their cellphones, but just 21% have renters insurance, according to a survey from the National Association of Insurance Commissioners (NAIC) that reveals notable gaps in understanding of insurance.

“There’s a gap in insurance knowledge among Gen Z adults. This is a critical time in their lives, as they are laying the groundwork for their financial futures…” - Andrew N. Mais, NAIC president and Connecticut’s insurance commissioner

NAIC Survey Results

Gen Zers answering the survey agreed—more than half (54%) said “the thought of dealing with insurance” makes them feel overwhelmed or anxious. Over a third said they planned to “wait as long as possible” before buying life insurance or getting their own health insurance (28%).

About one out of four survey respondents could correctly define “deductible” (27%) and “copay” (29%). More (36%) understood “out of pocket” costs, but 19% understood “out of network.”

Nearly a quarter (22%) said they didn’t understand the importance of auto insurance or had little to no awareness of it.

Mais added, “Our survey also revealed some encouraging findings about Gen Z. For example, 61% of Gen Z adults surveyed already pay for their own health insurance, while 49% carry automobile coverage. There are several areas where we have a solid base to build on as we ‘Mind the Gap,’ or help close protection gaps and ensure more people have the coverage they need.”

Implications for Policy Comprehension

The NAIC survey follows another recent study from Trusted Choice, the national brand for the Independent Insurance Agents & Brokers of America (the Big ‘I’). Even savvy consumers don’t fully understand the nuances of their coverage—but 86% think they do.

Over half (56%) weren’t aware a standard homeowners policy does not cover flood damage, and 70% did not know their policy would not cover materials or fixtures that are going to be installed during home renovations.

Well over half (55%) didn’t realize their personal auto policy wouldn’t cover business use of a vehicle, while 44% thought their auto policy would cover personal items stolen from their cars (homeowners or renters policies will usually cover this).

“Because insurance protects people’s most important assets, it’s crucial that policyholders understand their coverage. But unfortunately, our survey shows there is a considerable insurance knowledge gap among consumers,” said Charles Symington, Big ‘I’ president and CEO. “Independent insurance agents can bridge that gap by serving as a resource on coverage expectations versus realities, especially in this difficult insurance market where many people need more guidance.”

How Consumers Can Build Knowledge

Perhaps the best way Gen Zers and others can learn about insurance is by leveraging the expertise of a trusted insurance agent or broker.

It’s an insurance professional’s job to help make coverage understandable for everyone. If you want to know more about what kinds of insurance policies are available, what they may cover, what may be required and how to find affordable rates, contact Sanford & Tatum, An Alera Group Company. We can help explain insurance in simple terms, with no purchase obligation.

Avoiding insurance topics can lead to significant financial setbacks. Let us answer your questions to help make you more informed and empowered about your financial future.

The content of this News Brief is of general interest and is not intended to apply to specific circumstances. It should not be regarded as legal advice and not be relied upon as such. In relation to any particular problem which they may have, readers are advised to seek specific advice. © 2024 Zywave, Inc. All rights reserved.