KiwiSaver key to insurance future
AMP expects bundling life insurance with KiwiSaver to become a key way to fight New Zealand’s under-insurance problem.
Tuesday, April 12th 2016, 6:00AM 
5 Comments
by Susan Edmunds
Therese_Singleton
It launched AMP Essentials this week, which it told advisers was a way to make insurance more affordable and accessible and to stem the flow of KiwiSaver members moving to banks.
An AMP Essentials policy can be issued online without medical checks, to AMP KiwiSaver members who answer two underwriting questions. It is only available to customers who have their KiwiSaver with AMP. If they leave the scheme, they lose their AMP Essentials cover.
Eighteen- to 30-year-olds can get temporary disablement cover up to $2083 a month for a year, trauma cover of $10,000 and life cover of $100,000 for $11.
Those aged 31 to 39 would pay $12 for the same amounts and customers aged 40 to 47 would pay $22. The price increases for older customers and the policies only cover people aged up to 60.
Under AMP Essentials Plus, customers would get twice as much life and trauma cover and $2916 a month in temporary disablement for $17 if they are 18 to 30, $20 if they are 31 to 39 and $38 if they are 40 to 47.
AMP general manager of investments and insurance Therese Singleton said it was an important type of product. “The concept of bundling life insurance is, we think, a really important part of the future of life insurance in New Zealand. New Zealand is so grossly underinsured, in large part related to the fact that there isn’t any employee benefit linkage between superannuation and life insurance. The KiwiSaver legislation is quite specific about the inability to take deductions from superannuation to pay for life insurance.”
But she said linking insurance to superannuation savings was an important part of solving the insurance issue for New Zealand.
“Given the size of AMP, the system capability we have and the depth of experience in working on large employer-based insurance and super schemes, that’s how we have created the opportunity.”
She said it was a basic product and would not be the complete solution to many people’s insurance needs.
“It’s low levels of cover but we are hoping it will lead to people being more comfortable with the concept of buying life insurance products.”
Those who wanted full financial advice would be passed on to advisers, she said.
Adviser Robert Oddy said AMP could face a hard slog to sell the product.
“If people don’t see the value in the first place I don’t know how successful it’s going to be but good on them for having a go.”
Murray Weatherston said it seemed to be the “McDonaldsisation” of KiwiSaver. “Do you want fries and some insurance with that? But the more products they have with a client the more likely they are to keep them.”
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Comments from our readers
What we did show is that there is massive under-insurance in the areas of income insurance, trauma and TPD.
We did discuss the Australian scheme which ties life cover to Superannuation and explained how this can actually make the situation worse. This is because in a Super/Life scheme (i) life amounts tends to correlate to Super amounts, when life generally needs to drop as wealth rises, and (ii) people think their insurance is solved so actually buy less income insurance, trauma etc.
I would love insurance to be packaged with Kiwisaver, but it not easy to get it right, and insurers like AMP need to get together and recommend cover rules which ties in with client needs.
I do congratulate AMP in trying to be innovative in a stagnant market.
It would be useful to produce integrated life-cycle packaged products which automatically adjust the life/income/trauma/TPD as people age.
The Guarantee Contribution Rate includes the cost of permitted risk benefits which has the effect of taking more of the allocated percentage contribution as the accountholder ages.
There are very few, if any, Aus schemes that don't offer risk benefits, and it's this integrated contribution that creates the "I'm fully covered" illusion, when in reality the risk benefits are limited in scale and scope.
One effective approach has been to regard the super-linked risk benefits as safety net cover, with more detailed needs analysis conducted to customise benefits to individual circumstances, including the safety-net covers provided by the super fund.
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