Kiwis 2x more likely to pick car insurance over life/health

The FSC’s latest Money & You report showed that while 98% of homeowners insure their property and 95% of car owners protect their vehicles, four out of five New Zealanders aren’t insuring their income against sickness or disability. The key issue appears to be cost.

When respondents were asked why they don’t have insurance, the majority (67%) said it was too expensive. Insurance dropoff is also increasing.

When asked why they’d cancelled their insurance, the majority of former health/medical, total and permanent disability, income protection, and trauma/critical illness policyholders cited increased cost of living pressures. This reason was also high among former life insurance holders (34%), while 35% said they no longer saw the value in it.

Among health insurance holders, one third have downgraded their coverage due to cost-of-living pressures, with another 22% seriously considering cancelling their policies altogether. Those earning under $50,000 are bearing the brunt - 37% have already downgraded their health cover.

What's particularly striking is how few New Zealanders access insurance through their workplace. A massive 78% fully self-fund their life insurance, while only 18% receive health insurance through employer packages. This represents a significant missed opportunity, especially when individual premiums are clearly stretching household budgets.

The advice gap in insurance

This is where it gets interesting for advisers. While 33% of people consult advisers about mortgages and 28% seek help with KiwiSaver, only 24% discuss life insurance and just 18% talk about health cover. There's clearly an advice gap right where New Zealanders need the most protection.

This may be because respondents felt they had a generally good understanding of insurance products. The research shows 85% rate their understanding of life insurance as moderate to very good, with 45% claiming good to very good knowledge.

It isn't because people don't want to engage either - 72% have made insurance claims at some point, so they understand how the system works. Rather, it seems advisers and clients alike gravitate toward more tangible, immediate financial decisions like home loans and investments, while the abstract concept of protecting against future unknowns takes a back seat.

There's also a disconnect in how people consume information about financial products. While most people skim or focus only on key aspects when reading terms and conditions, 67% say they somewhat understand the contents. This suggests people are making decisions with partial information, which is exactly where professional advice could add value.