The number of life insurance policies (an indicator of the number of people insured) issued in New Zealand has been static since the beginning of 2013, and growth potential would appear to be modest, according to a report released last month by the Financial Services Council (FSC).
Premium revenue from new customers for life insurers in New Zealand has been lower than the reduction in premium income from lapsed and cancelled policies since around 2012.
The report, entitled “Towards Prosperity – An insight into New Zealand's financial services industry”, says that this suggests that customers with new or terminating policies are more price sensitive than the shrinking core group of existing policyholders.
Premium revenue for the industry has only continued to rise because of the contractual increases in premiums for existing policyholders for factors such as inflation and the increased risk due to policyholders getting older. These increases now average almost 8% per year – well above the rate of inflation.
Changing demographics and lower home ownership rates mean traditional triggers for insurance are changing. The numbers of households that either own the house in which they live or have dependent children—the prime market for life insurance—barely changed between 2006 and 2013 despite a growing New Zealand population. Today, they account for about 30% of New Zealand households, and renters are now the fastest growing household group.
Meanwhile, health insurance has recorded steady growth over the past five years. Industry operators have reported an increasing volume of claims paid over that time, on the back of a rising population aged 50 and over. This has forced health insurers to raise premiums to maintain profitability. However, a long-term decline in private health insurance membership numbers is anticipated as policies become less affordable and cancellations continue among people aged over 50.
The report, the FSC's first edition, was researched by the New Zealand Institute of Economic Research (NZIER). The FSC is a non-profit organisation and the voice of the financial services sector in New Zealand. Its 34 members comprise 95% of the life insurance market in New Zealand.