New Zealand's life insurance market is stagnating and its primary market - parents with children who own homes with a mortgage - is shrinking, research has revealed.
A report by economic think-tank NZIER commissioned by life-insurer Sovereign has revealed revenue for the industry is only growing because existing policy-holders are ageing and premiums have risen with inflation.
"The number of policies seems to have been static since about the beginning of 2013.
"The average premium for both new and lapsed policies seems to be lower than the average premium for existing policies," according to economist Mike Henson who undertook the research.
Henson said this suggested new customers and those who had dropped their insurance were more price sensitive than a shrinking core group of existing policyholders.
The research also found the group of people typically targeted by insurance - families with a mortgage - was shrinking while the number of people renting was on the rise.
While more people were insuring their house, contents, health and car, take up of life insurance is low and New Zealand has the third lowest penetration rate in the OECD after Greece and Mexico at just 0.9 per cent.
Jeffrey Stangl, executive director of education partnerships at Massey University, who spoke on a panel discussion hosted by Sovereign this week said it highlighted a serious problem.
Why is it we have no problem insuring our bach, our boat, our cars, our property but we don't really give proper consideration to life insurance?
Stangl said research showed there was a lack of understanding by the public and life insurance could be overly complicated.
Another explanation for the slowing market was the falling home ownership rate as buying a house had previously been an entry point for people to get life insurance cover.
"Those traditional triggers are becoming non-existent. The industry has to come up with different products."
The other problem was a lack of trust by consumers.
"That is a big issue that confidence, that trust issue."
Diane Maxwell, the Commissioner for Retirement, said its research showed people tended to be either under-insured or over insured.
"We have worked with families where all three kids are insured and mum is a solo parent on a benefit.
"I think the sales point is critical."
Sue Chetwin, chief executive of Consumer New Zealand said people did not trust the industry especially when advisers could earn up to 230 per cent in commissions and then switch their client elsewhere within a few years to get another payout.
"Do they have your best interests at heart?"
She said the industry needed to do a lot better.
"Your first step is tidying up your own house, so it's not just about trying to sell people something.
I think the industry has got to change dramatically.
She said 60 per cent of policies were sold by independent advisers which meant there was a real need for insurers to keep those advisers sweet with incentives yet the consumer didn't know how the adviser was being paid.
"Disclosure is poor."
But Rod Severn, chief executive of the Professional Advisers Association, said the majority of advisers had their clients best interests at heart.
"Yes there are the odd rogues out there. The PAA represents 1200 advisers and the greatest majority of those do put consumers first."
But he agreed there needed to be greater transparency.
Chris Lamers, chief marketing and strategy officer at Sovereign said the industry needed to evolve to meet the changing needs of its audience.
"We know we have low levels of life insurance in New Zealand and to be falling further behind other OECD countries is sobering.
"We have to change - our challenge is demonstrating to these different family groupings and individuals that they need to have a plan in place for when things go wrong.
"To help Kiwis have a plan B in place, we need to build an industry that consumers trust and understand."