FSC says Kiwis are under-insured as regulatory deadline approaches
By Jenny Ruth
June 11 (BusinessDesk) - Research commissioned by the Financial Services Council found most New Zealanders don’t like to think about the consequences of risks to life and limb - or to pay for financial protection against such risks.
“Our research indicates that despite recognising that financial risks exist and that they could cause significant disruption to day-to-day living, over 25 percent of New Zealanders tend not to think about how they could be impacted financially,” the survey of more than 2,000 people found.
“Over 40 percent of respondents occasionally think about and consider this type of risk, but then forget about them.”
The research comes just weeks before the country's life insurers are due to report to regulators on plans to improve their performance.
The Reserve Bank and Financial Markets Authority reported in January that the first stage of their review of 16 life insurance companies found the industry is vulnerable to misconduct, is ignoring whether its products are suitable for customers and is too slow to make changes.
Those companies were sent follow-up letters detailing their individual shortcomings and requiring the companies to report back to the two regulators by June 30.
FSC chief executive Richard Klipin says the conduct and culture review wasn’t related to his organisation’s decision back in February to commission the research, but he acknowledges that it is relevant to how the industry behaves.
The survey, conducted by Horizon Research, highlights how financially unprotected many New Zealanders are.
It found two-thirds of New Zealanders don’t have sufficient savings to cover an unexpected short-term loss of income for three months.
About one in three said they don’t need to worry about paying for medical treatment because of ACC or the public health system, but 37 percent said they do worry about such costs.
“The sector needs to lead a debate and discussion around risk,” Klipin says.
The research findings are “a call to action,” he says. “The flip side is the sector’s also got a task to do. We’re the people who manufacture the products and engage with consumers. The message is that we can and should be doing more.”
The message in FSC’s research certainly chimes with the advertising campaign one of its more prominent members, Partners Life, launched in March.
Rather than promoting Partners Life per se, the campaign was designed to raise awareness of the need for life insurance and income protection insurance.
The research found that unaffordable premiums were the biggest reason why people are under-insured, followed by insurance being “not a priority” and then by policies not representing value for money.
Previous FMA studies have concluded that only 2 percent of sales of life insurance policies are genuinely new, rather than just churn, or switching customers between policies to generate income for life insurance agents. However, the industry disputes that estimate.