The growing but slowing market for insurance

This market is a good one, and I am a perennial optimist for both financial services in general and insurance financial advice in particular.

Monday, September 16th 2019, 11:35AM

by Russell Hutchinson

I like to think of our target market as being roughly equivalent to the number of people between 16 and 65 that are also in work.

Being in work gives a client a decent chance of both having enough money to pay a premium and being healthy enough to insure. There are about 2.7 million people in this category. There are people that leave the category – achieving age 65, people going overseas, leaving the workforce, reduces the pool by about 44,000 each year. Those that die reduce it by about 8,000. Counting those joining the group – kids turning 16, returning kiwis and immigrants of working age adds just over 100,000 each year. So, all told, the net gain is about 50,000 annually.

Pretty good. Even better, in most years their incomes rise a little bit faster than inflation. The combination of the increase in numbers of people and income describes the market opportunity.

The market-place is growing, but total sales and total policy numbers are falling.

But an awful lot of them aren’t insured – about a million depending on which research you prefer to believe, but they don’t vary that much. That’s a million people who are working (remember we excluded those not in the formal workforce earlier, and some of them do need and buy insurance).

We know from the Financial Services Council data that the number of policies in-force fell modestly between June 2018 and June 2019. There was a net decline of about 1,800 policies. My best estimate is that was probably a decline of about 700 to 800 people insured. So, our market grew by over 50,000, and we lost about 700. Which is unfortunate.

There are headwinds. Slowing growth and housing costs are macro-economic factors which can affect the market. Rising costs are a factor too. Most clients experience an increase in cost of cover of between 10% and 14% annually, incomes rarely match that. It’s a factor in the high lapse period that starts about age 50. But against that there are positive factors to consider – longer lives, and longer working lives, suggest that cover should be held for longer, too. More complex lives, filled with responsibilities to multiple households, businesses, and employers suggest a need for cover, and critically advised cover, that has never been seen before.

To borrow a phrase from an adviser some time ago – there are acres of diamonds at our feet. The question is, how to reach them?

Tags: insurance Insurance Advisers Life insurance Russell Hutchinson