How insurers might tackle the trust gap

Coulter was among four panelists at the recent FSC conference who led a discussion on the future of life insurance in this country. “There is a massive gap in life insurance but it’s an ocean when it comes to income protection,” he said. “This is highly interconnected with the trust gap….but there’s an education gap as well.”

The size of the underinsurance gap became clear in a piece of research released last September by Swiss Re which measured for the first time New Zealand’s mortality protection gap - the shortfall in financial resources that households need if they’re to maintain their standard of living if the primary income earner dies.

This mortality gap is a “staggering” $670 billion ($830,000 per household), according to George Stavliotis, a Sydney-based vice president of Swiss Re and one of the four conference panelists. It means nearly 65% of New Zealand households are under-protected with the biggest gaps being among low-income earners and middle-aged high-income earners.

“There is a big opportunity here and a very big need,” Stavliotis said. The Swiss Re research indicates that closing the gap in New Zealand would reap an extra US$1.5 billion in annual life insurance premiums.