Insurance rates rising: Survey

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AIG Life says the levels of personal insurance among New Zealanders have increased by a remarkable 50% since 2005, but a quarter of people remain uninsured.

Tuesday, March 18th 2008, 7:20AM

AIG has just released its second Life Matters survey of 380 people, which looked at rates of life, medical, income protection and critical illness insurance, and canvassed their views on a range of personal financial issues.

The uninsured respondents gave two primary reasons for not purchasing cover: a lack of funds and the belief that insurance is not worth the cost.

Of those who do hold personal insurance (77%), their primary considerations in choosing a provider, after financial strength, are their awareness of the company, its size, the strength of their relationship with the person recommending it, and knowing other people who use that insurer.

Most people (60%)buy insurance directly from companies or through brokers, against 18% from banks.

AIG Life chief executive David Pierce said the figure of 23% uninsured is still surprisingly high compared to many other countries. A similar Australian study conducted in 2005 found that 80% of adult Australians had life insurance, against 48% in the AIG Life 'Life Matters' survey. 67% of Singaporeans and 53% of Hong Kong residents have life insurance. 57% of Singaporean and 32% of Hong Kong respondents reported having critical illness insurance, compared with 15% of Kiwis.

"These comparisons indicate that New Zealanders are much more vulnerable to unexpected events or illness than people in other developed countries in Asia-Pacific," Pierce said.

Pierce said that of those who are uninsured, 71% said they would use their savings if the need arose, and the rest would rely on family support or equity in their property, and that 50% of uninsured people said they could survive for six months or less without their usual income, and 20% said less than three months.

"It suggests to us that although New Zealanders are becoming more financially savvy, which is reflected in the increased rate of insurance take-up, there is still a sizeable proportion of the population which remains completely unprotected if the worst happens – death, unexpected health problems or redundancy leaving a household with drastically reduced or no income."

Pierce believes the resistance to insurance take-up stems largely from the, incorrect, assumption that personal insurance is expensive.

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