Insurers ponder cover for retirees

Insurers are wrestling with how to offer insurance to New Zealanders holding larger amounts of debt later in life.

Thursday, February 16th 2017, 6:00AM

by Susan Edmunds

David Boyle, group manager of investor education at the Commission for Financial Capability, said New Zealanders were holding debt longer, and later in life.

Many were not going into the workforce until their mid-20s and bought houses later than their parents had.

Research has found that a third of New Zealanders are on track to still have mortgages at 65. That mirrors a Canadian study, which found the number of people moving into retirement with debt has increased 60% over the past decade.

“They are going to need insurance to cover that liability,” Boyle said. “That’s what life insurance is there for, to protect you in the event of death when you have something like a mortgage.”

But he said the cost of the cover could be hard for older people to bear. “When you get older and you review your insurance every year, it goes up every time as you get into a different age bracket.”

He said insurers would have to consider whether covering more people in those age brackets would enable them to reduce the premiums they charged.

“Our view is that people need to protect their assets and what matters to them. If people are having a mortgage longer they need to factor in that cost when they take out the debt. It’s an opportunity for the market and insurance businesses to come up with a product for that area, it’s only going to grow.”

Natalie Cameron, chief executive of AIA, agreed there was a mounting underinsurance problem.

"Insurers do a lot of work on demographics and considering how best to deliver competitive prices in their chosen market segments," she said.

"At AIA, we believe we are competitive in the later demographics and we really like to support those clients, amongst other segments.

"Affordability will be a factor of personal risk levels but also of product design, competition, and how well we can look after and retain those clients. We have to offer products that deliver value and are affordable, and we have been able achieve that in the older demographics."

Tags: Life insurance