It is no secret that a vast amount of New Zealanders are significantly underinsured, and, according to one expert, insurance companies should be doing more to understand why – especially when the root cause of underinsurance is financial hardship.
Tim Barnett is the chief executive of FinCap, an organisation that offers free budgeting and advocacy support for people going through financial difficulty. Barnett says his organisation currently sees 70,000 people a year come through the doors of its 200 local services, and they collectively have around $700 million in debt – an average of $10,000 a head.
FinCap’s clients are 41% Māori, and over two thirds are women. According to Barnett, they often come in with a sense of deep alienation from insurance.
“Insurance is a world often unknown to them,” Barnett said. “Spending $35-$50 a week on insurance creates a high risk, as it comes from the funds vital for day-to-day survival. Many times those people take the risk of no insurance, and they get away with it. Not being insured actually seems like a remote risk to them, but insurance premiums are the costs which drop out of a paycheck-to-paycheck budget.”
“Others have had insurance before,” he continued. “They had reasonable incomes, but a crisis hit them. I’d like insurers to reflect on their experience if they come to their insurance company wanting to waive their payments for a while, and how that is handled.”
Barnett says that when it comes to getting insurance, the reasons behind forgoing it can run much deeper than income. Prior to an act of parliament, it had been almost an industry norm to see Māori as an “unacceptable insurance risk,” and denying coverage to Māori was considered acceptable.
“That experience has created an alienation, and a very shaky view of insurance as time goes on,” Barnett explained.
“That’s an experience that has stuck on an emotional and cerebral level. Things are different now, but those memories of alienation live on.
“Feelings about insurance can go deep, and the figures are stark – one in three Māori adults has health insurance, compared to half of the population. Eight in 20 Māori have contents insurance compared to 11 out of 20 of the general population. That gap is much more than an income difference.”
According to Barnett, the insurance industry knows that it needs to collectively address this issue. FinCap has been working with the Insurance Council for the past year, running training events for its financial mentors on risk management, protection and insurance – something he says is the first step towards opening the door between insurance, and people in financial difficulty.
“Our training equips our financial mentors with the skills to open those doors, have discussions with brokers and work through disputes,” Barnett said.
“The insurance industry is also starting to focus on these tough and relevant issues, with a little help from friends and government.”
“Naming an issue is crucial to tackling it, as is giving an insight into what financial hardship really feels like, what making an insurance payment means in that situation, and what an appropriate response from an insurance company looks like,” he concluded.
“Something like automatically cancelling a policy after two months of non-payment may be sidestepping a whole reality of hardship and vulnerability, which I think a caring company needs to recognise, name and handle appropriately.”
