PR-2.3.06-UnderinsuranceGrowingProblem.htm

Investment Savings and Insurance Association (ISI)

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MEDIA RELEASE

2 March 2006

UNDERINSURANCE A GROWING PROBLEM

Total annual premiums for life insurance grew by 7.6% from $1.14 billion to $1.23 billion in the year ended 31 December 2005.

Releasing the latest Investment Savings and Insurance Association life insurance statistics, Vance Arkinstall, CEO, stated “life insurance growth continues but at a rate that is resulting in a significant underinsurance problem for many New Zealanders”.

“Fortunately, growth in ‘risk protection’ policies, the major preference for most New Zealanders, was 11.4% over the same period. However, this is almost certainly slower than the combined effects of growing mortgage debt and other consumer debt such as credit cards. This points to a growing underinsurance issue in New Zealand”, said Mr Arkinstall.

AMP has recently released the results of a survey that found only 55% of families have life cover and only 31% had cover equivalent to 5 times the average wage which the industry broadly considers to be the bench mark of minimum sufficient cover. ISI does note that individual circumstances will vary.

The AMP research produced results consistent with a survey conducted in Australia and follow a survey undertaken by AIA late in 2005. All pointed to a growing gap between the level of life insurance held by many families and the amount they would need to maintain their standard of living if anything happened to the breadwinner.

“The growing shortfall of adequate life insurance cover has been flagged by the industry as a social problem that for many could be easily fixed. We encourage all families to contact their life insurance adviser and review their existing life insurance programme to make sure it is keeping pace with their changing needs”, said Vance Arkinstall.

“Life insurance is not expensive and with weekly premiums for minimum levels of cover costing little more than the price of two cups of coffee a week, protecting your family’s well being is affordable and excellent value”, said Mr Arkinstall.

“In the year ended 31 December 2005, the life insurance industry paid out $370 million in death claims, a further $202 million in maturities and $170 million in other benefits. The total payments of $740 million provided a huge contribution to the security of thousands of New Zealanders and their families”, Vance Arkinstall said.

The market share of the top 10 NZ life insurance companies for the year ended December 2005 was:

Company

Top 10 position

Total Market

%

Top 10 position

Risk Products

%

Sovereign

1

28.09

1

30.9

AXA

2

16.09

2

11.99

AMP

3

14.84

4

9.18

Asteron

4

8.79

3

9.85

AIA

5

6.33

5

7.79

Tower NZ

6

5.39

8

5.02

Westpac Life

7

4.21

6

5.22

CIGNA Life

8

4.10

7

5.05

Fidelity Life

9

3.70

9

4.56

BNZ Life

10

3.21

10

3.98

(Based on annual premium policies.)

For further information contact:
Vance Arkinstall, Chief Executive