Cost and lack of understanding barriers to taking out insurance cover
A general lack of understanding of risk versus return combined with affordability worries remain the key factors keeping New Zealanders underinsured.
Tuesday, November 26th 2024, 5:47PM 
1 Comment
The Financial Services Council’s latest Money & You research confirmed underinsurance was still an issue in New Zealand, with only 41% saying they hold life insurance and 39% health insurance. A quarter of respondents had taken out insurance to cover trauma or critical illness, income protection or total and permanent disability.
“Despite this low uptake, over 90% of those that have life and health insurance believe their policies offer good value for money," said FSC chief executive Kirk Hope.
There was a higher level of awareness around the limitations of insurance, with 70% of respondents understanding the effects of age and illness on premiums and cover. Nearly half of all respondents admitted to a poor understanding of the risk-return relationship which was likely a contributing factor to the low numbers, said Kirk Hope. The cost of insurance policies was also a barrier.
“Despite green shoots in the economy, the cost-of-living crisis is still affecting decisions around life and health insurance, with affordability proving to be a barrier for many,” said Kirk Hope.
“The findings highlight an urgent need for greater financial education around risk management, alongside efforts to remove barriers that prevent employers from offering insurance as part of employee remuneration packages.”
Health and life insurance by the numbers
The FSC’s data shows more than 4.14 million people in New Zealand were covered with life insurance products, while 1.52 million people had health insurance for the year to the end of September.
Current life insurance premiums total more than $3.2 billion while health premiums total $2.96 billion. More than $1.27 billion in life insurance claims were paid during the period, while $2.5 billion in health insurance claims were paid out.
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Nothing new here. I've been in this great industry for 25 years next year and this article could have been written almost word for word in 2000. (population numbers a bit different)
Nothing has changed, and it comes back to two fundamental drivers.
* Education - the government putting time, energy, and money into educating our kids so they have a better understanding of fundamental life skills, including health and medical services, money management, and insurance.
* Insurers and industry bodies also putting money and action into the education of the wider public about what we do, across the industry. In 25 years, all I have seen is talk. Talk, consultants that tell us what we know, more talk, and no damn action!
As for advisers, I see nothing but hard work in helping clients understand the basics to decide on the products they need. Our role isn't to educate people; it's to advise them, but you can't advise people who have no idea about the subject! No wonder we get issues where clients say they didn't understand their policy/product!
If the industry really wanted to change this, what's stopping you?
With a 1/4 of a century of talk that has changed nothing, that's an F on the report card!