Life and health market outlook 2025
Everyone is telling us that there are a lot of lapses. Most reviews of the life sector say that there are some serious challenges: there are a lot of lapses and large numbers of people are uninsured, and not-great levels of new business.
Tuesday, March 4th 2025, 9:59AM 
1 Comment
by Russell Hutchinson
Everyone is telling us that there are a lot of lapses. Most reviews of the life sector say that there are some serious challenges: there are a lot of lapses and large numbers of people are uninsured, and not-great levels of new business. That there is a problem, there is little debate. Exactly how the problem could be resolved often focuses on externalities: the behaviour of customers, legislators, or regulators. Sometimes we spend time blaming each other – me included – as sometimes research is identified as a key problem!
While it is true that customers have changed their behaviour, we do not think that it is so fundamentally changed that they will not buy life insurance – because they do buy it at greater rates in other markets. They have also bought it more here, in the past, too – based on our analysis of insurer accounts.
Advisers and non-advising sales staff remain an important channel, and even in markets where there are substantially more digital and direct sales – they are deeply involved in those, so we think there is nothing so fundamentally changed that the advice channel cannot grow. In fact, recently we had that confirmed by an update from the companies’ office data update: in the year to September 2024 there was a net gain of 423 Financial Advisers and 26 new Financial Advice Providers. I can’t be sure what share of them offer life and health advice, but it would be a surprise for it to be none.
Of course, the channel is smaller in Australia, relative to their economy, than it is here. That is a possible future, but at our current legal and regulatory settings, not the strongest probability. In fact, when asked about whether our legal and regulatory settings are restricting new business levels, we must consider carefully that in the UK, a highly regulated market, more sales are made even accounting for a larger population and economy.
Legislators rarely find the insurance market as fascinating as they have in recent years. After the current legal work programme has been completed, we will probably have a regime that is not particularly unfriendly when we compare it with markets that we consider benchmarks.
Lastly, our regulators are working within well-established parameters – and when compared to the environment in say the UK or Australia, it seems that they are absorbing the experience of other jurisdictions and including access and cost as customer outcomes alongside quality of advice. Combined with this we are now seeing reducing interest rates, falling inflation. What we need is for the jobs market to perk up a bit and we can look forward, perhaps later this year, to falling lapse rates and higher levels of new business. We hope. I do not think I am alone in this moderately optimistic view. There are more people looking at the insurance sector and thinking it worth investing in, Booster, nib, Nippon Life, and PPS Mutual are all examples.
So, we think there may be some reasons to be cheerful, as Ian Dury suggests in his song.
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Reducing interest rates aren’t making a substantial impact on people’s uncommitted monthly income now because council rates, house insurance, rent, food and fuel prices all keep increasing in cost. People with loved ones know they should have cover, but it ultimately boils down to can whether they afford to when they have the above to service first as a matter of priority.
Despite what some people may think the financial services industry has also been overregulated by Wellington’s bureaucracy. This has further compounded the problem of underinsurance in New Zealand with the process of securing cover now made unnecessarily complicated for many customers, especially those who only want limited advice.