Cost-of-living pressures challenge insurance uptake in New Zealand

The Financial Services Council (FSC) of New Zealand has released a report highlighting the challenges New Zealanders face in managing financial risks, particularly in the areas of life and health insurance.

The findings, published in “Money & You: Managing Risk Through Challenging Times,” pointed to rising living costs as a key factor influencing decisions around insurance coverage.

Kirk Hope, FSC chief executive, acknowledged the nation’s ongoing underinsurance issue.

“New Zealand continues to grapple with an underinsurance challenge, with 41% of respondents saying they hold life insurance and 39% health insurance,” he said.

Despite these relatively low rates, more than 90% of insured respondents believe their policies provide value.

Key findings on financial preparedness

The report identified significant gaps in financial preparedness and understanding of risk. For example:

• Nearly 45% of respondents admitted they lack a clear understanding of the link between financial risk and return.
• Many reported being unprepared for the financial impact of losing their household’s primary income earner.
• While over 70% of respondents were aware of limitations in insurance – such as the effects of age and pre-existing conditions on premiums – peace of mind and financial protection remain key motivators for obtaining coverage.

Most respondents said their life and health insurance was funded out of pocket, with a smaller share receiving subsidies or full funding from employers.

In April, the FSC noted a rise in health insurance uptake, with an additional 250,000 New Zealanders securing coverage in the past year. This increase brings the total number of insured individuals to 1.45 million in 2023. The report linked the growth in health insurance to demographic shifts, including an aging population and a life expectancy now averaging 82 years.

Cost barriers persist

Hope emphasised that affordability remains a significant hurdle.

“Despite green shoots in the economy, the cost-of-living crisis is still affecting decisions around life and health insurance, with affordability proving to be a barrier for many,” he said.

FSC NZ improves financial literacy

To address these issues, the FSC’s Blueprint for Growth aims to enhance financial literacy, promote broader access to insurance, and reduce barriers for employers offering insurance as part of employee benefits.

See LinkedIn post here.

Hope noted the need for collaborative efforts to improve financial education and make insurance options more accessible.

“The findings highlight an urgent need for greater financial education around risk management, alongside efforts to remove barriers that prevent employers from offering insurance as part of employee remuneration packages,” he said.