More than half the people of New Zealand avoid thinking about buying insurance according to a survey by the Financial Services Council (FSC) which identifies the high level of underinsurance across the population.
Research shows an increasing number of New Zealanders are underinsured when it comes to their lives, their incomes, or suffering a major illness. For example, the report notes that 54% of people are in denial – preferring not to consider the financial impacts of having no insurance or of being underinsured.
Compared to a similar survey carried out in 2011, the level of underinsurance – when it comes to life policies – has increased from 59% in 2011 to 71% in 2018 according to the FSC’s Gambling On Life report.
Among the reasons given by those surveyed for not being insured include the cost of premiums, insurance being given a low priority, or policies not being value for money. However, life insurance was considered the most important type of insurance to have according to those surveyed.
Nevertheless, just under a third (30%) of policyholders worry that the amount of cover they have is not enough while 44% believe they should have more insurance but can’t afford it.
“Gambling on Life found that while many New Zealanders are aware of the importance of life insurance, this isn’t reflected in adequate levels of cover for themselves,” says Richard Klipin, CEO of the FSC.
FSC’s Life Insurance Street Interviews
The survey looked at the three main types of life insurance available in New Zealand; life insurance, income protection/mortgage repayment insurance, and critical illness insurance.
“While 54% of those surveyed agree that it is important to have the right amount of insurance to cover risks including illness, death and job loss; estimates of underinsurance are much higher,” says Klipin.
Critical illness showed the highest level of underinsurance with only an estimated 9% of Kiwis being sufficiently insured, followed by 11% who had adequate income protection/mortgage repayment insurance and 29% with adequate life insurance.
Klipin says reasons given for underinsurance include affordability, priority, trust, self-insurance and complexity.
“The story is similar internationally, with most countries showing significant insurance gaps and challenges such as the demand on Government support outpacing supply, behavioural barriers to insurance and consumers underestimating the likelihood of things going wrong.”
However, for those New Zealanders who are insured, latest figures show that consumers are being paid out more claims, raising from $1.15bn in 2017 to $1.5bn in 2019, and there are 3.93 million insurance contracts in place (as of 30 September 2019).
Main reasons for not having life insurance
- Can’t afford it: 39%
- Not a priority: 26%
- Isn’t value for money: 17%
- Don’t trust insurance firms: 10%
Rate of underinsurance
- Life Insurance: 71%
- Income Protection: 89%
- Critical Illness: 91%
The survey sample was 2,061 people – carried out in December 2018 and May 2019 – plus two focus groups.
The Gambling on Life report is the last in a series of three from the FSC on life insurance. Read our other reports here and here.
Download the full Gambling on Life report by licking the image below.
