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Life insurance payouts hit new $1 billion high

For the first time ever, the life insurance industry has paid out just over $1 billion in annual benefits to policyholders.

Friday, September 2nd 2011, 7:18AM 5 Comments

Insurance Savings & Insurance Association chief executive Peter Neilson said the latest results, for the year ended June 30, 2011, provide a clear example of the value the life insurance sector provides to individuals, families and the wider New Zealand economy.

"To be able to make such a large contribution to the financial wellbeing of Kiwis is really pleasing," Neilson said.

"While the circumstances surrounding these payments are often extremely sad, our policyholders are able to use the financial support we give them to reduce debt, pay for treatment, cover for lost income, and generally make things just a little bit better."

Neilson said that while the $17 million in life, income protection and redundancy insurance claims resulting from the Christchurch earthquake had a significant part to play in the result, the total level of benefits paid had actually increased $100 million over the last year.

"This time last year we were celebrating the fact we had broken the $900 million barrier for the first time," he said.

"So to reach the $1 billion level only twelve months later is extremely satisfying."

He said anecdotal evidence suggested more New Zealanders are taking up life cover.

"No doubt the experience of the Christchurch earthquake had made more people aware of the need for insurance. The industry has also become very innovative in providing new business models to make life insurance more accessible and affordable, including online distribution."

He also said the level of benefits paid demonstrated just how large the industry had become.

"The life insurance industry is a significant contributor to the New Zealand economy. Total in-force premiums are now at $1.83 billion annually, representing around 1% of GDP. Not only is our industry providing financial support to policyholders, it is also a large employer of Kiwis and a significant investor in New Zealand business."

However, Neilson said there is still more work for the industry to do.

"We know that a considerable number of people who lost their lives in the Christchurch earthquake either had no insurance, or not enough. Our aim should be to make sure that everyone who needs cover, has it."


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Comments from our readers

On 2 September 2011 at 8:21 am Nick said:
A 54% claims ratio in the year of a major mining disaster and a lethal earthquake doesn't sound like business is too bad, yet this is written as if the sector is being altruistic and wants to help more people. People should definitely have life insurance, but it's obviously not from the goodness of the insurers hearts.
On 2 September 2011 at 2:43 pm eh? said:
sorry Nick - where are you getting your figures from? My understanding is that life companies pay out over 90% of claims. Perhaps you are getting mixed up with Fire & General Insurance
On 2 September 2011 at 7:23 pm Nick said:
Perhaps, Eh?, you should read the article? 1.83bn in premiums against 1m in claims...
On 5 September 2011 at 12:14 pm Johnny Adviser said:
Nick, the rest is reserves (ask EQC about the vlaue of reserves) and running the business. That coming cheap let along free. The $17M paid for earthquake claims is a drop in the bucket, and had close to zero impact on these numbers.
On 14 September 2011 at 6:25 am pietro michel said:
A claims ratio of 50% to 60% is about right. This is based on what I heard Milton Jennings say at an underwriting event a few years ago and looking at accounts. For every $100 dollars paid in premiums it appears typically much less than $60 is paid in claims - the rest goes in expenses and commission and to make a profit (fair enough as shareholders need a return)- just look at the accounts.

The fact insurers pay out over 90% of claims is great and probably true but a separate issue - this means that they get say $100m in premiums, have claims received of say $60m of which then may pay $55m (over 90%).

Running the business is probably not cheap - expenses and commission.
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