By , Published 17th May, 2016.
Call for increased transparency to build consumer trust in life insurance
• Life insurance lowest by category when compared with house, health, contents and car
• Prime market of household owners contracting, giving way to increasing number of renters
An independent report analysing New Zealand’s life insurance industry reveals the number of people insured in New Zealand has been static for over three years – highlighting a need for industry-wide change across a number of key areas including improved transparency, an increased focus on consumer education, and access to trusted advice.
Key findings from Resetting Life Insurance, undertaken by the New Zealand Institute of Economic Research (NZIER), show that over a nine year period, new customer rates for life insurance were the lowest of any insurance category (12%), while house insurance premiums almost tripled, health insurance increased by 84 percent, contents insurance by 45 percent and car insurance by 19 percent.
New Zealand has the third lowest penetration of insurance among 31 OECD countries with only Greece and Mexico lagging behind.1
Dr Jeffrey Stangl, Executive Director of Education Partnerships at Massey University and financial capability advocate, says the report highlights the need for some changes within the industry in an effort to build consumer trust and meet the evolving needs of New Zealand’s diverse population.
“The report shows that Kiwis are prioritising house, health, content and car insurance but fall short when it comes to protecting their finances and their lives. Increased transparency is important for the industry to address when looking at ways to improve consumer trust in life insurance as a category, and to ultimately help Kiwis have a financial plan in place if the unexpected happens.
“Underpinning this is consumer education and access to advice to help people understand what options are available to them and what insurance is right for them based on their needs. Life insurance isn’t just about a lump sum payment for your dependents when you die. What about income protection for the twenty-something single renter who finds themselves unable to work? What about disability cover for the main income earner with a family and a mortgage who is permanently disabled due to an injury?”
Laurence Kubiak, Chief Executive of NZIER, says the report findings suggest an increasingly varied dwelling model in New Zealand, the impact of which has diversified the life insurance market and changed traditional entry points.
“The traditional prime life insurance market, house owners with dependents and a mortgage, now represent just 30% of households in New Zealand. The biggest and fastest growing group by household type is those in rented accommodation – with this shift some of the traditional triggers for when people think about life insurance and how it fits into their lives have been removed,” says Kubiak.
Sovereign’s Chief Marketing and Strategy Officer, Chris Lamers, agrees the industry has to evolve to meet the changing needs of a changing audience.
“We know we have low levels of life insurance in New Zealand and to be falling further behind other OECD countries is sobering. We have to change – our challenge is demonstrating to these different family groupings and individuals that they need to have a plan in place for when things go wrong, and life insurance can be a critical part of this – last year alone Sovereign paid out $350 million in claims to people all over New Zealand.
“As part of a focus on financial capability within New Zealand, it’s important to address the risk low levels or no insurance at all poses to individuals and the national healthcare system. To help Kiwis have a plan B in place, we need build an industry that consumers trust and understand.”
Download Resetting life insurance report
1. OECD 2011 - calculations highlight that life insurance penetration within New Zealand is 0.9 percent compared to an OECD average of 4.7 percent
About the research
The research, commissioned by Sovereign was undertaken by the New Zealand Institute of Economic Research in 2015 with respondents weighted by age and gender based on Department of Statistics population estimates. The survey sample represents results gathered from 1,599 people aged 25-74 from across New Zealand.