Underinsurance in New Zealand has been persistently under the spotlight over the past few years, and studies suggest that it has remained a significant problem - particularly in the life, trauma and health space.
Commentary released by the Insurance Council of New Zealand in 2018 showed that although there is a high level of insurance penetration throughout the country, with as many as nine out of 10 Kiwis holding insurance, customers are still persistently underestimating the amount of cover they need.
New Zealand was ranked as the second riskiest country in the world in a 2018 Lloyd’s of London study, and ICNZ chief executive Tim Grafton said while it was encouraging to see a high level of insurance penetration across the country, people were still underestimating the cost of replacing their assets and supporting their income if a death or disaster was to strike - something which could leave them very vulnerable.
Meanwhile, a Massey University study showed that around 54% of Kiwis have inadequate levels of life insurance, and at least half would suffer a 40% income drop due to underinsurance if the primary earner was to pass away.
Swiss Re head of life & health in New Zealand Kresh Wright said that when it comes to perceptions of insurance, many Kiwis are either not thinking about cover at all, or have the perception that they would be helped out by friends and family - something which has given New Zealand one of the highest mortality protection gaps in the Asia-Pacific region.
“There are a lot of households in New Zealand that are accumulating a lot of debt, but haven’t yet gotten to the stage where they’re thinking about insurance and about accumulating wealth,” Wright said.
“On the perception side of things, New Zealanders also seem to be very similar to Australians in that they think they can rely on the government, on other public funds and on family and friends to come to the rescue if they experience a mortality shock or a loss event. Those sorts of perceptions are less strong in some of the other Asian markets like Japan, Singapore and Hong Kong, so they tend to have more coverage.”
“I think this is a really huge opportunity for insurers in New Zealand to get involved, and I know that many of our clients have that at the top of their list,” she explained.
“They really want to think about how they can reach more New Zealanders, and education is key here. I think insurers, alongside the government and other industry bodies, can help to increase that level of education and awareness.”
Wright said that ‘good news stories’ about insurance are also important. She noted that the majority of the public only sees insurance in the news when a claim has been declined, or if an insurer gets into legal or financial trouble - something which has long contributed to a poor and untrustworthy image of the sector.
For Swiss Re, Wright said that the focus was going to be on education through advisers and digital channels - both channels that customers have increasingly embraced over the past several years.
“I think it’s really important that we start to get some of the insurance ‘good news stories’ out,” Wright said.
“We hear a lot about the bad news, but there are thousands of stories on the opposite side, and if more Kiwis could hear those, I think they’d be able to better understand the benefits of insurance and increase their confidence in the industry. We need to get across that insurance is a sensible way to protect yourself and your family against some of these shock events.”
“Something we ourselves are looking at quite closely is different channels towards contacting and communicating with consumers,” she said.
“New Zealand has historically been all about advisers, but we’re definitely looking at more digital channels and ‘omnichannels’, which is a combination of online and human interactions.”
“We want Kiwis to have the information they need to make good decisions about their insurance, and our past studies have shown that they’re actually very open to receiving it, and to going through application processes online,” Wright concluded.
“So we really want to go down that route, alongside having simpler products. We think those two things could really make a big difference.”
