Life insurance sales flat for December quarter
Monday 7 Mar 11 9:14pm
The Investment Savings and Insurance Association (ISI) says the latest life insurance statistics were to be expected given the economic and legislative headwinds the industry faced in 2010, coupled with significant merger and acquisition activity, and the tragic events in Christchurch.
Total life insurance in-force premiums rose in the quarter to 31 December 2010, up 2.1% to $1.783bn. However, growth was practically flat in the largest product category, with term life insurance recording only a 0.3% increase in in-force premiums (to $832m). Term life insurance accounts for 47% of total in-force premiums across the life insurance industry.
The result for the second largest product category, income protection insurance, was only marginally better with in-force premiums 2.6% higher (to $242m) over the December quarter.
This flat growth across the two largest product categories was enough to suppress the overall result, despite many of the smaller, niche product categories recording double digit growth, albeit from a much smaller base.
The most impressive of the larger product categories was trauma insurance which recorded a 10.6% increase in in-force premiums for the December quarter and a 20.6% increase for the year (to $211m).
Meantime the fourth largest category, conventional products (whole of life and endowment), continued its steady decline, falling 1.2% for the quarter and 6.1% lower for the year (at $122m).
ISI Chairman, Sean Carroll believes the result was to be expected given the large number of issues the industry faced throughout 2010; from legislative and regulatory reform, to ongoing economic uncertainty, industry mergers and acquisitions, internal restructuring, and the after effects of the September earthquake in Christchurch. “Companies have been distracted with a number of internal and external challenges, and Advisers have been dealing with the impact of the new FAA regulations. And, of course, the events in New Zealand’s second largest city will have understandably had a major impact on sales activity.”
Mr Carroll expects this trend will continue when the March 2011 quarterly statistics are released, with many issues still ongoing, compounded by the latest tragic earthquake in Christchurch.
“We want to extend our heartfelt condolences to the people of Christchurch, many of whom are family, friends and colleagues. Many of our members have staff and offices in Christchurch and have been directly affected by this tragedy”.
Mr Carroll says the industry is keen to assist the people of Christchurch in whatever way they can and members have been quick to offer support and assistance to their clients. “Many of our members have waived premiums for clients in Christchurch, and all our members are working hard to ensure life, trauma and disability claims are dealt with quickly and compassionately.”
Unfortunately Mr Carroll fears the reality will be that many of the dead and injured won’t have had any form of life insurance in place. “If the 2009 Victorian bushfires are any indication, it may be that only 20%-30% of people killed or injured will have been adequately insured. We already know there is a massive insurance gap in this country, and we need to work harder to bridge it.”
He says the Government has done an excellent job in appointing the Savings Working Group to help identify what can be done to increase the level of savings as a nation. Mr Carroll believes a similar task force is required to consider the level of under-insurance in New Zealand and the social and economic impact this could have on the nation. He says ISI has assumed responsibility for leading this study.
“We have recently formed a working group to implement New Zealand’s largest ever life insurance research project. The study will help us to quantify the level of under-insurance in New Zealand, identify the reasons why New Zealanders don’t have enough insurance, and measure what the social costs are for our country as a result.”
“If we can provide Kiwis with greater financial certainty in times of tragedy, then our industry can feel it’s done a good job.”