香港保险认知研究2021.pdf

Report onInsurance Literacy Tracking Survey in Hong Kong 2021AUGUST 2022ContentsExecutive summary21.Introduction32.Literature review72.1 Concepts of financial and insurance literacy72.2 Survey and scoring mechanisms for 13assessing financial and insurance literacy2.3 Hong Kong insurance sector153.Methodological framework of the ILTS173.1 Design of the questionnaire173.2 Scoring mechanism183.3 Survey fieldwork204.Key survey findings214.1 Insurance literacy in Hong Kong214.2 Insurance literacy of policyholders 28versus non-policyholders4.3 Product-specific findings325.Conclusion37Annex 1:Core questions of the OECD/INFE survey 38Annex 2:Scoring questions of the ILTS40Annex 3:Scoring method for the question on 44confidence in insurance decision makingAnnex 4:Key demographic profile of the sample45Annex 5:The RSP mechanism46Annex 6:Estimation of perception gap49Annex 7:Recent actions of the IA in upholding 50good market conduct and ethical practicesReferences53Executive summaryInsurance literacy is a combination of knowledge and skills,attitude and behaviours necessary to make sound decisions,thus contributing to better insurance inclusion.In an inclusive market,all citizens including the unserved and underserved should have access to and use of appropriate and affordable insurance products.The more inclusive the insurance market is,the higher the social value it can create.In order to assess and track trends in insurance literacy in Hong Kong,and to identify gaps that can shape the Insurance Authoritys(“IA”)policy development and public education,the IA has conducted an Insurance Literacy Tracking Survey(“ILTS”)with a focus on personal insurance products.The design of both the survey questionnaire and the scoring mechanism for the ILTS was based mainly on the Organisation for Economic Co-operation and Developments(“OECD”)framework for measuring financial literacy.Survey questions were also adapted to the context of Hong Kong,with the characteristics of the Hong Kong insurance market being taken into consideration.The survey findings showed that respondents were rated as moderately literate in overall insurance literacy;moderately literate in knowledge,skills and attitude;but less literate in behaviour.There was a general understanding about policyholders rights,insurance principles and product features,but limited knowledge of risk exposure and protection needs.The perceived value of insurance was quite high and the level of trust in the insurance sector was moderate,but insurance purchase was adversely affected by choice overload.Identified behavioural issues include:over-reliance on the advice and experience of family or friends;procrastination in dealing with insurance;limited policy comparison;focus on promotions;and inadequate reading of terms and conditions.A positive correlation between insurance literacy and income and education levels was also found.Non-policyholders had significantly lower levels of insurance literacy than policyholders.Some common patterns,which may contribute to non-policyholders under-engaging with insurance,were observed.They include:lower perceived value of insurance;lack of trust in the insurance sector;lack of insurance knowledge and confidence in insurance knowledge;and lack of awareness of lifetime risk profiles.Apart from overall literacy and findings on non-policyholders,product-specific findings were also explored.The ILTS posed questions for the general public,the insurance sector and regulator to examine improving the insurance literacy of the Hong Kong population.All stakeholders are recommended to work together to develop solutions,close the knowledge gap and address attitude and behavioural biases.31.INTRODUCTIONInsurance is a risk management and mitigation mechanism safeguarding people against financial losses.It creates social value by providing a sense of security and peace of mind to individuals,relieving the burden on governments of offering social security benefits,and supporting business and economic growth by fostering innovation and more efficient capital allocation.1 The social value of insurance depends on the level of insurance inclusion.By this,we mean the unserved and underserved,including vulnerable and low-income populations,should have access to and use of appropriate and affordable insurance products.2 The more inclusive the insurance market is,the higher the social value it can create.This insurance inclusion is affected by insurance literacy,among other factors.The Organisation for Economic Co-operation and Development(“OECD”)found that there is a correlation between financial inclusion and financial literacy(Atkinson and Messy,2013).Inadequate knowledge and awareness of the financial products available,or lack of trust in them,may prevent individuals from accessing and making full use of those products.In this report,insurance literacy is defined as a combination of knowledge and skills,attitude and behaviour necessary to make sound decisions related to insurance.A high level of knowledge and awareness in relation to insurance and risk exposure facilitates peoples choice of appropriate insurance solutions.Trust in insurance drives people to take out insurance.On the other hand,individuals without sufficient knowledge and trust in insurance may hesitate to take out any insurance.As a result,they are not able to capture the benefits of insurance.Further analysis of the difference in insurance literacy between non-policyholders and policyholders can help us identify barriers to insurance take-up and formulate policy measures to foster insurance inclusion.The insurance market in Hong Kong is mature,as reflected by high insurance penetration and density.3 But this does not necessarily imply that it is highly inclusive,as policyholders may not obtain appropriate or adequate protection.In life insurance,the“mortality protection gap”or the shortfall in financial resources needed to sustain a decent living standard for surviving family 1 See Geneva Association(2012)for details.2 See Center for Financial Inclusion and Institute of International Finance(2018)for details.3 Insurance penetration refers to the ratio of insurance premiums to GDP of an economy,while insurance density means the ratio of insurance premiums to total population of an economy.In 2020,the insurance penetration and density in Hong Kong were 20.8%and USD9,746 respectively,ranking first and second respectively in the world,according to Swiss Re Institute(Aizpn et al.,2021).1.Introduction4members in the event of a breadwinners premature death was HKD1.9 million per working adult in Hong Kong in 2019.4 This sizeable gap indicates that policyholders are not purchasing the appropriate life insurance products to satisfy their protection needs.Turning to non-life insurance,almost 80%of respondents to one survey did not purchase home insurance.Around 60%of respondents believed that the cost of alternative accommodation and temporary storage of furniture would be covered by fire insurance.5 These low penetration rates and misconceptions suggest that Hong Kong people do not have adequate and appropriate protection against property and casualty risks.There are also numerous disputes between policyholders and insurers or insurance intermediaries in Hong Kong.The Insurance Complaints Bureau(“ICB”)received 583 complaint cases in 2020.Among the 349 complaints that were closed,the application of policy terms,excluded items and non-disclosure accounted for 86%of complaints.6 This suggests that better insurance knowledge and awareness can help the Hong Kong public to better understand the design and features of insurance products,and result in their making better decisions.We also gathered some comments on insurance literacy in Hong Kong from the insurance market,including practitioners.These comments are summarised as follows:1.The level of insurance literacy is quite low.Reasons include:Insurance products and contracts are too complicated for customers to understand.There is a lack of trustworthy channels for customers to acquire accurate and detailed information about insurance.The perceived value of life insurance declines when policyholders have paid premiums for a long period but have not filed claims on non-savings plans,or as insurance costs increase with age.Customers are impatient to read the terms and conditions of insurance contracts.Policyholders seldom review their insurance needs and coverage regularly,as they gain a sense of security after purchasing insurance.Customers have a general concept of the broad coverage of insurance products,but their knowledge of the functions and exclusions of products is limited.4 Mortality protection gap is estimated by calculating the difference between protection needs and resources available.Protection needs consist of current household debt and future medical cost,education cost and household expenditure,while resources available are composed of life insurance coverage,savings and investments,and assets related to retirement schemes.For details,please refer to Insurance Authority(2021b).5 AXA conducted a survey entitled“AXA Home Protection Awareness Study”in 2017 to assess Hong Kong residents understanding of home insurance and its coverage.Over 1,000 respondents aged 18 or above were surveyed.For details,please refer to AXA(2017).6 See Insurance Complaints Bureau(2021)for details.52.Some people do not purchase insurance.They do not consider insurance to be a basic need and hence do not budget for it.Also,people who are employed may have a false sense of security due to having group insurance provided by employers,as they may not enjoy insurance benefits once they leave employment.These comments prompted us to study the following questions:How to measure the level of insurance literacy in Hong Kong?How to analyse the current state of insurance literacy in a systematic way?What are strengths and weaknesses of insurance literacy among Hong Kong people?How does insurance literacy differ between policyholders and non-policyholders?Are there any common patterns of literacy among non-policyholders?To what extent do customers understand the design and functions of different insurance products?Are they able to choose appropriate insurance products based on their risk exposure?Studying the questions above can help us identify literacy gaps and explore policy measures to narrow these gaps.Improved literacy will facilitate the general public to obtain appropriate and adequate protection,which maximises the social value of insurance.To evaluate insurance literacy in Hong Kong,we needed a standardised tool.However,there is little research on measuring insurance literacy in a systematic way,and none focuses on Hong Kong.In order to assess insurance literacy in Hong Kong,to track trends in insurance literacy,and to identify gaps that can shape policy development and public education,the Insurance Authority(“IA”)conducted an Insurance Literacy Tracking Survey(“ILTS”).7 The ILTS focused on personal insurance products,excluding commercial lines targeting corporate policyholders.Ultimately,the IA aimed to achieve the following via the ILTS:(i)Develop a measurement framework to evaluate insurance literacy in Hong Kong and track trends in insurance literacy on a regular basis;(ii)Improve the publics understanding of their risk profiles and their insurance knowledge in terms of functions,design and features of insurance products;7 The IA conducted the ILTS in collaboration with PricewaterhouseCoopers Limited(“PwC”),which provided advice in the capacity of an external consultant.PwC accepts no liability or responsibility to any third party who gains access to this report.Mercado Solutions Associates Limited(“MSA”)was engaged to conduct the survey fieldwork.1.Introduction6(iii)Enhance consumers knowledge about their rights and responsibilities,and thus help them to make informed decisions about insurance;(iv)Strengthen public confidence in the insurance market and insurance practitioners;and(v)Promote insurance inclusion and the sustainable development of the insurance market in Hong Kong.Apart from the ILTS,the IA previously launched a public education campaign on lifetime risk profiling to give a comprehensive picture of the different risk exposures individuals face during their lifetime.To support the campaign,the IA publishes a thematic report“Lifetime Risk Profiling and Insurance Literacy”8 along with this report,drawing on insights from the ILTS.The rest of this report is structured as follows:Section 2 provides a literature review;Section 3 introduces the methodological framework of the ILTS;Section 4 discusses the analysis and implications of the survey findings;and Section 5 offers conclusions.8 https:/www.ia.org.hk/en/infocenter/files/Insurance_Literacy_Tracking_Survey_Thematic_Report_Eng.pdf72.LITERATURE REVIEWThis section reviews the body of research covering concepts of financial and insurance literacy,and proposes a definition of insurance literacy for the operation of the ILTS.To develop a framework for assessing and tracking insurance literacy in Hong Kong,we reviewed research on the survey and scoring mechanisms for assessing financial and insurance literacy.As issues specific to Hong Kong would be taken into account when designing this framework,phenomena prevalent in the Hong Kong insurance sector were also to be considered.2.1 Concepts of financial and insurance literacyWith financial literacy growing in importance as a way for individuals to improve their financial well-being9,governments around the world have stepped up efforts to understand levels of financial literacy,while exploring policy measures to enhance it among their populations.To this end,surveys have been undertaken to measure levels of financial literacy by adopting different definitions.Measurements of financial literacy vary substantially across surveys,while a lack of common definitions poses a challenge when making international comparisons.In order to measure and track levels of financial literacy across jurisdictions,the OECD International Network on Financial Education(“OECD/INFE”)developed a common questionnaire based on previous surveys(Atkinson and Messy,2012).This common questionnaire adopted the following definition of financial literacy:Financial literacy is a combination of awareness,knowledge,skill,attitude and behaviour necessary to make sound financial decisions and,ultimately,achieve individual financial well-being.10This definition has been widely adopted,as reflected by the participation of 26 economies(including Germany,Italy,Malaysia and Hong Kong)in the OECD/INFEs survey in 2020(OECD,2020).By contrast,there is a lack of commonly accepted definitions of insurance literacy.Tennyson(2011b)noted that one of the limitations in conducting research on insurance literacy is the absence of generally accepted criteria to identify the essential elements of insurance that a literate co