When asked if insurance helped reduce financial worries, the answer from a cross-section of working-aged Americans was “kind of,” with many reporting only limited relief from financial anxiety from insurance, according to consumer experience and research firm Cake & Arrow.
The panel ranged in age from 21 to 54, representing people from across demographics, career fields and locations.
Overall, participants were optimistic about their future personal financial prospects despite economic uncertainty. Although the panel views the future with rose-hued glasses, most of them are focused on the here and now. This doesn’t bode well for insurance, according to Cake & Arrow, which reported insurance appears to lack immediate value while it continues to grow in cost. Additionally, the panel found coverage is often not comprehensive enough and comes with too many caveats to feel worthwhile.
Further, a lot of the panel said they begrudgingly bought insurance because it is required, and weren’t certain it would come through if and when they need it.
“For decades, the insurance industry, particularly P&C, have taken for granted that their products are required,” Josh Levine, Cake & Arrow founder and CEO, said in a release. “But as auto and home premiums double or triple, and insurers pull out of riskier markets, the cost of insurance may be reaching a tipping point, making it truly unaffordable for some and not worth the expense for others.”
According to Levine, and as demonstrated in the health insurance sector, consumers have no problem skipping on things that were once considered essential when affordability becomes a factor. This can lead to consumers seeking alternative forms of risk protection.
It can also drive people to seek out new ways of living to mitigate these risks. Although in the case of property insurance, the converse seems to be true as home buyers continue to move to more disaster-prone areas.
“If what we learned from people in this study is any indication, I believe the industry may be at a critical juncture,” Levin said. “The question now is whether it will rise to the occasion, and approach this shift as an opportunity and not a threat. Only time will tell.”
Overall, those whose financial optimism is “more materially grounded” tend to view insurance as a no-brainer and typically have the financial flexibility to protect those possessions.
Younger panelists were more likely to find insurance confusing and overwhelming, feelings that were largely driven by not having much experience with insurance.
However, Cake & Arrow found that as people are given more insights into how to manage their finances, the more in control they feel and the more willing they are to take a hard look at their financial futures.
Once taking an honest assessment of their financial futures, consumers tend to see the indispensable role insurance plays “even if they hate paying for it,” Cake & Arrow concluded.
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