New research commissioned by the Financial Services Council has revealed that New Zealanders don’t like to think about or prepare against financial risks, despite being well aware of what those risks are.
The research ‘Risking Everything’ conducted by Horizon Research explored New Zealanders attitudes to financial risk and how they protect their wealth should the worst happen.
“Risking Everything found that although most Kiwis are aware of their financial risks, they aren’t doing much about it”, says FSC Chief Executive, Richard Klipin.
When prompted, respondents indicated they are aware of personal risk products available to them to mitigate personal financial risks, with:
- 81% aware of life insurance
- 67% aware of income protection
- 43% aware of critical illness insurance
“Over 50 percent of Kiwis said that they disliked having to think about impact of financial risk, and when they do think about it, almost half (43%) then forget about it,” said Klipin.
“The research indicates that a stigma still remains in New Zealand around discussing, managing and engaging with financial risk.”
The research also found that savings as a fall-back in difficult times was also lacking, with two thirds of New Zealanders indicating they wouldn’t have enough savings to cover an unexpected short-term loss of income.
“Of those surveyed, [only] 37 percent thought that they had sufficient savings to cover household expenses such as rent or mortgage repayments for a three-month period,” said Klipin.
To add to this, the majority of New Zealanders have not considered the risk of losing their income, as only 23 percent had figured out how long they could cope financially if they became seriously ill or injured.
“Nearly two-thirds of those surveyed had checked car and home contents insurance in the past few years, yet only 20 percent had considered the financial implications for other members of their family if they died,” noted Klipin.
“It is worrying that many of us spend more time worrying about protecting our car than our life, family or source of income and that we are still very reliant on family and friends to help us out,” he added.
Why New Zealanders are under-insured
The new research also uncovered the reasons around under-insurance in the life sector, with premium affordability and risk prioritisation two of the key issues impacting take-up rates.
Respondents with no insurance or inadequate cover were asked to choose from a list of possible reasons to explain this, across life insurance, income protection/mortgage repayment insurance and critical illness insurance products.
The top three reasons were very similar for all three insurance types and included:
- Being unable to afford the premiums
- Not being a personal priority
- Not representing value for money
But even among those holding these types of insurance policies, 28 percent said their policies are too expensive for the protection they give and 36 percent said they only need enough insurance to cover the important things they need to pay for each month.
However, over 70 percent of respondents with an insurance policy felt that life insurance was a small price to pay and 66 percent said that although it might be seen as costing quite a lot if things go wrong, they will be protected.
Klipin said the research has highlighted that more work needs to be done to improve access to high quality and easy to understand protection for all New Zealanders.
The independent survey involved 2,061 New Zealanders.
Click here to view the full report, Risking Everything – Insight Into How New Zealanders Manage Risk.