Kiwis face 'trade-off' buying insurance

New Zealanders face an unintended risk trade-off when they assess the value of insurance, new research from the Financial Services Council shows.

Wednesday, September 11th 2019, 1:00AM

The FSC has released a report Moments of Truth about New Zealanders' views on insurance.

It found peace of mind was the key driver for people purchasing risk products.

But many faced a trade-off. They assessed the cost of an insurance policy, the likelihood of an event, and their chances of having a claim paid.

Survey respondents said their trust in the process could be improved by reducing jargon and writing policies in plain English.

They saw less need for life insurance in early and later life but it was seen as easier to claim on than other products.

People who worked with advisers were more likely to be confident in the products they had chosen and to feel more supported.

Only 14% of respondents said they felt that insurers treated people fairly when they had not disclosed all relevant information, even though two-thirds understood the need to do so.

People who had made a claim were more positive about the industry.

Most people (46%) said they found out about insurance from the internet. Only 19% had talked to an adviser or the bank. But 22% of those who took out a policy in the last five years had used an adviser or insurance agent.

"From personal experience I know just how invaluable life insurance can be at a time of need and trauma. Moments of Truth tells us that this is the case for many people and that the sector delivers peace of mind for thousands of Kiwis every day," said chief executive Richard Klipin.

“Moments of Truth also finds that too many of us are making a risk trade-off when considering life insurance. People are weighing-up the likelihood of an event happening, and the likelihood of a successful claim, versus the cost of premiums.

"We know that tackling life insurance is complex and the research shows clearly that consumers who seek face-to-face advice are more confident that they have the right policy and are supported.

“This reinforces the importance of the adviser relationship and getting good advice when making decisions on insurance.

“Building education and awareness of life insurance and the claims process will be critical to ensuring that people take a more informed approach to deciding on life insurance cover. As an industry we’re completely up for that challenge."

He said the report showed there was work to do. It was concerning that only 8% of those without a current policy had considered purchasing insurance in the last two years.

Klipin said the industry needed to "double-down" on its efforts to improve customer outcomes.

“Unfortunately, bad things and traumatic events happen to all of us at some stage in our lives and it’s vital that you have the protection you and your loved ones need.

“The New Zealand life insurance industry pays out around $4 million a day or $1.47 billion per year in claims supporting Kiwis when they most need it.”

The report can be found here.

Tags: FSC insurance Insurance Advisers Life insurance