David Pierce, chief executive of AIG Life, answers questions about insurance and some research into how much insurance New Zealanders have.
KEY POINTS:
How are New Zealanders insured when compared to the rest of the world?
We are far behind our international counterparts in rates of personal insurance. AIG companies in Asia-Pacific have conducted similar research and discovered that, for example, 80 per cent of Australians have life insurance compared with 48 per cent of Kiwis. In Singapore, 57 per cent of adults have critical illness insurance, which only 15 per cent of New Zealanders have.
What kinds of insurance are New Zealanders falling behind on?
We asked people about rates of life, medical, income protection and critical illness insurance, and found they are falling behind on all of them, particularly the latter two.
Why do you think this is the case?
Two of the main responses were people didn't believe they could afford it, or didn't think insurance was worth the cost. More than 70 per cent of the uninsured people surveyed said they would rely on savings, and the rest would turn to families for support or use property equity. However, half of those people said they could survive on their savings for less than six months. This seems to leave Kiwis vulnerable compared to people in other OECD countries, particularly when the economy and housing markets are softening, and there is stress on incomes.
How does your industry hope to change opinions around insurance?
Insurance is about protecting loved-ones, so it's a matter of sharing information so people can decide which types of insurance will suit their circumstances. People generally understand what life and medical insurance cover, reflected in take-up rates of 48 and 43 per cent respectively, but the knowledge of critical illness and income protection insurance, held by just 15 and 13 per cent of Kiwis, is limited. There are a lot of financial pressures on households and many people are feeling uncertainty about the future. We hope to communicate how people can protect themselves and their families in ways that meet their needs and are affordable.
How does the cost of insurance here compare with other countries that have higher insurance rates?
Favourably - insurance is cheaper than many people think. Most people surveyed who don't have insurance said they couldn't afford it, but many don't realise a $100,000 life-insurance policy can cost $10 a month.
Are there any new forms of insurance that are becoming more popular?
We are seeing an increase in employers providing insurance for employees as part of their benefits packages. Employers paying for, or subsidising, insurance is a widespread practice overseas, and in a tight labour market it can make a difference in recruiting and retaining good people. In our survey, 38 per cent of people said a package would encourage them to remain in their current employment, and 33 per cent said it would be an incentive to change to a new role. This tells us that in a market with about 3.5 per cent unemployment, employee benefits can tip the balance, and we are working to develop attractive options for employers to offer staff.
Are there any kinds of insurance that the industry thinks should be compulsory?
AIG Life's view is that people should have the final say over their own financial health, and that means personal insurance should not be compulsory. However, we do believe that most New Zealanders need insurance to ensure they and their loved-ones are financially secure should the unexpected occur.
