Overcoming underinsurance

Just under half of New Zealanders do not trust insurance companies, and 31.2% would be ‘very unlikely’ to use an independent financial adviser for information on life insurance.

Wednesday, April 13th 2011, 6:52PM 3 Comments

by Benn Bathgate

These were some of the findings from a Cigna Insurance survey examining underinsurance among New Zealanders.

The survey also found that 36.4% of New Zealanders have no life insurance, with the figure split evenly between those who believe they should have cover but don't, and those who don't believe they need it.

It also found that 49.2% believe they have adequate cover in place - a view Cigna CEO Gail Costa disagrees with.

She pointed to recent research from Australia that found that despite having a much higher per capita insurance, its $9.5 billion life industry is still facing the challenge of underinsurance.

"And if they're underinsured, and their insurance per capita is eight times ours, we've got to be uninsured," Costa said.

She also said she wasn't surprised by the findings revealing the poor showing for advisers, which also found 29.4% would be ‘quite unlikely' to approach an adviser for insurance.

"I don't think it's because of the adviser as such, I think it's because of the process they [the consumer] associate with that. The interview - how do you do that? I don't know this person. It's paperwork, you probably have to have a medical. I think it wasn't separate from the complexity, it's a hassle, I don't know how to go about it. It's a difficult process."

Another key problem facing the insurance industry identified by the survey was a lack of trust, with 22.6% saying they ‘strongly agree' and 21.2% saying they ‘agree' insurers are untrustworthy, a situation Costa says hasn't been helped by the recent events at AMI.

Costa said Cigna used the survey to help design its LifeOne product, which she believes removes many of the barriers identified that stop people seeking insurance.

 "What the research really showed us is that people are looking for certainty and ease. They generally agree that life insurance is necessary and want to get it, but they neither understand not trust what they've been offered in the past."

She said making the online application quick and easy was one key factor in the design.

"You don't have to have a long interview process. You can choose to ring us or apply online, you'll be covered on the spot. That could be within 10 minutes. If you go online we warn people it could take up to 15 minutes, but if you're really healthy it can be five to 10 minutes."

Costa acknowledged getting over the trust issue was "really hard", but she believes it is achievable.

"Deliver on what you say you're going to do, mean it when you advertise and say it's going to be an easy process - make sure it is. I think we have to look really hard at the claims situation, plain wording, no tricks with product design."

Benn Bathgate is a business reporter for ASSET and Good Returns, email story ideas to benn@goodreturns.co.nz

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Comments from our readers

On 15 April 2011 at 9:40 am Geoff said:
Underinsurance is a real live issue in NZ and one we all can participate in to reduce.
What Darren Gannon is doing at Newpark with Lead generation for Life Insurance is a fantastic opportunity for it's members and the general public.
People I have spoken with are grateful for the opportunity, as a comment often heard is "I was thinking about doing something..."
So being proactive is the answer, along with having a good clear process so some education is also provided in the service given.
On 19 April 2011 at 12:24 pm Andy said:
Rather than the "31.2 would be ‘very unlikely’ to use an independent financial adviser for information on life insurance", I would suggest that the figure would be closer to 100%, since the right to use the word "Independent" has been taken away from us! And along with that right, the right not to be judged as biased...
On 20 April 2011 at 10:56 am Johnny Adviser said:
I'm wondering whether the quesiton was framed using the term "adviser", "insurance adviser" or "financial adviser" as I believe a different result would have applied to each, given the perception particularly with "finacial adviser".
Given Cigna mostly sell direct, I'm guessing it was "financial adviser" that was used, so as to get the result they wanted.
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