Abstract
The conceptualisation of the insurance culture and the identification of a standard measuring instrument are the first steps towards defining a literate consumer. Obviously knowledge, understood as the ability to understand and use concepts in a conscious way, is considered to be a key variable for measuring the levels of many conceptual definitions of literacy, so also for insurance literacy.
 The aim of our research is precisely to verify the validity and reliability of a questionnaire that is composed of 7 questions that can represent a tool for measuring the level of insurance knowledge of consumers. The questions investigate the mere knowledge of insurance definitions and concepts, without going into too much detail about specific types of policies. To pursue this goal, a factor analysis has been conducted through a sample that is composed of 274 Italian respondents. The results show that those items are able to measure the basic insurance knowledge of a consumer.
Highlights
Financial literacy, defined as “knowledge and understanding of financial concepts and risks, and the skills, motivation and confidence to apply such knowledge and understanding in order to make effective decisions across a range of financial contexts, to improve the financial well-being of individuals and society, and to enable participation in economic life” (OECD 2014), is the key to making informed financial decisions
We propose and validate a new insurance knowledge questionnaire to test one of the three dimensions identified to define the concept of consumer insurance literacy
The econometric analyses conducted on the questionnaire have established how the questions developed on insurance knowledge are able to measure basic insurance knowledge without going into the details of particular types of policies
Summary
Financial literacy, defined as “knowledge and understanding of financial concepts and risks, and the skills, motivation and confidence to apply such knowledge and understanding in order to make effective decisions across a range of financial contexts, to improve the financial well-being of individuals and society, and to enable participation in economic life” (OECD 2014), is the key to making informed financial decisions. According to some researchers (Gine, Townsend & Vickery, 2008; Tennyson, 2011; Cole, Gine, Tobacman, Topalova, Townsend & Vickery, 2013; Driver, Brimble, Freudenberg & Hunt, 2018; Lin, Bruhn & William, 2019), consumers without insurance knowledge and the important role it plays do not consider the insurance policy a risk management tool. For this reason, consumers often tend not to insure themselves, or to insure themselves inadequately, and are under-insured when an adverse event occurs (Rice, 2016; Lin et al, 2019)
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