by Niko Kloeten
The latest figures from industry group the Financial Services Council show that $1.11 billion was paid out by the industry in 2013, down 6.5% from 2012 ($1.19 billion) but up by more than 17% compared to 2009 ($950 million).
The statistics for the year to December show premiums increased to $1.8 billion, with in force term life premiums reaching $1 billion for the first time in the December quarter.
FSC chief executive Peter Neilson welcomed the growth in income protection insurance, which has seen a near doubling in pay-outs (95% increase) over the last five years.
Annual premium income for individual trauma insurance had grown by 58% over the period.
Other individual replacement income insurance premiums had grown by 29% and term life insurance premiums had grown by 31%.
The growth rates are all well in excess of inflation over the same period, which according to the FSC suggests the gap between personal insurance held and the risk exposure is narrowing.
Most New Zealand families with a mortgage have life insurance but only one in five New Zealand families have income protection cover.
Neilson said most New Zealand two-income families would be ineligible for a sickness benefit if they were off work for an extended period, because of the family income test.
“This is the greatest area of vulnerability for New Zealand families and it is good to see the insurance gap narrowing.”
Fidelity Life chief executive Milton Jennings said some of the statistics were positive but the industry faced a number of challenges trying to increase the number of people insured in certain categories.
For example, income protection is “quite an expensive product”, particularly as people get older. And consumer awareness is still lacking about the benefits of certain insurance products, he said.
“It’s a little bit of both factors. Certainly there’s the cost but we also don’t have enough advisers out there in the market pushing the product. This is especially important when you have very technical products like trauma.”
Jennings said attracting people to the industry was difficult because “you have to deal with a lot of rejection” and the improving economy and stock market may not actually help the situation. “When there’s a downturn in investment markets people concentrate on risk and the sales tend to go up.”
Niko Kloeten can be contacted at niko@goodreturns.co.nz
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