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Life cover - the hard sell for Kiwi insurers

It's no secret that New Zealanders are often underinsured when it comes to life insurance but a recent Swiss Re report into the nation's mortality protection gap shows the gap is widening.

Thursday, September 23rd 2021, 1:13PM 2 Comments

by Matthew Martin

Following on from the reportGood Returns asked the heads of Partners Life and Asteron Life for their views on the situation and what they're finding in the New Zealand life insurance market.

The Swiss Re report - Closing New Zealand's mortality protection gap - was released this week and estimates the mortality protection gap (MPG) for New Zealand households – the gap between households' financial resources and the protection they need to maintain their standard of living in the event of the death of a primary earner – at $670 billion.

The report also estimates the MPG will rise to $750 billion within the next 10 years due in part to rising consumption and household debt levels.

Swiss Re says the industry needs to act now considering that only 39% of people surveyed own a life insurance policy and estimates the MPG per household in New Zealand at more than $830,000.

The report says closing the gap in New Zealand won't be easy with the perceived high cost of life cover being a key reason with almost two-thirds of respondents considering it too expensive to buy.

Partners Life managing director Naomi Ballantyne says Kiwis are underinsured for personal risk protection products but says the reasons are complex and are a combination of several factors.

"We don’t think bad things will happen to us. It makes for a nation of extreme risk-takers which is why we are so good at risky sports and why we invent stuff like bungy jumping."

Ballantyne says Kiwis also overestimate their financial resilience, think the Government will look after them through ACC or a sickness benefit and have poor financial literacy.

"We have a culture that talking about money is taboo, so we don’t even talk to our kids about our income and expenses...[and] there is no government incentive or even encouragement to New Zealanders to protect themselves."

Ballantyne says direct insurers have historically struggled to gain market share "...because Kiwis need someone to almost hit them over the head with the facts and to educate them all in advance of any sale being made – hence the dominance of the IFA channel in New Zealand".

She says recent Partners Life campaigns are designed to use humour to confront people that bad things do happen and risk protection insurances can help them when they occur.

She says technology innovations designed to make buying risk protection insurance more efficient and effective can also help along with all insurers making more of an effort to educate consumers.

"Government safety nets cannot and will not protect their current lifestyle if it gets unexpectedly interrupted."

Head of Asteron Life Grant Willis says New Zealand is traditionally an asset-driven country and insuring things like their life or income isn't top of mind.

Willis agrees that insurance education is one way to help and "...we can always do more to tell those stories, to build trust in our industry and help New Zealanders understand how life cover might benefit them and their whanau".

"One thing that can help to reduce that gap is accessible and affordable advice, so advisers play a critical role in helping people understand their risks and protecting themselves through insurance."

He says insurers can help by ensuring that their products are flexible, affordable and sustainable and are easy for advisers to tailor and adjust to suit customers' changing needs.

"And to ensure we have support options in place so that customers who are facing temporary financial hardship can keep key insurance cover in place and maintain their longer-term financial resilience."

Tags: Asteron financial literacy Grant Willis insurance Life insurance Naomi Ballantyne Partners Life research Swiss Re

« How much more life insurance needs to be sold[UPDATED] Feedback prompts changes to Asteron's trauma cover »

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Comments from our readers

On 27 September 2021 at 12:12 pm Adviser1 said:
Maybe a more targeted effort to educate and drive enquiries to advisers would have been better than investing in TV/YT ads and complex advice tools. So hard to measure the effectiveness and justify the value in the short term. Just my thoughts anyway...
On 27 September 2021 at 1:47 pm Matron said:
Unlike overseas markets, the Life market in NZ:
1. does not have tax rebates on premiums;
2. does not have compulsory workplace insurance;
3. does not have compulsory superannuation (with a death benefit);
4. has a no-fault ACC insurance scheme.

In our market Advisers are paid to prospect for insurers. Hence the reason why upfront commission are so high as your average Joe Blogs can't do it.

Change the paradigm and insurance levels will increase. Until then nothing much will change.

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