Kiwis' ‘she’ll be right’ attitude to insurance could backfir

The financial impact of not being prepared to ‘weather life’s storms’ is the theme of this year’s Sorted Money Week.

Building an emergency savings account, assessing insurance cover and writing a will to protect loved ones are three areas the Commission for Financial Capability (CFFC) is asking New Zealanders to think about during the annual public awareness campaign, running from September 3-9.

“To be really resilient as a population we need to know that we can weather the big financial hits of an unexpected event,” says the head of the CFFC, Retirement Commissioner Diane Maxwell.

The first area of focus is insurance. CFFC’s research has shown that New Zealand ranks surprisingly low for insurance cover among OECD countries. We rank 35th out of 45 countries on insurance spend at 2.5% of GDP, compared to the OECD average of 8.4%. New Zealand sits well below the USA in 6th spot at 11.2%, the UK in 9th at 9.2%, and Australia in 21st at 4.9%. We are ranked similar to Argentina, Hungary and Iceland in our investment in house, vehicle, life, health and income insurance.

The CFFC’s own Financial Capability Barometer quarterly survey of 2000 New Zealanders backed up the OECD figure, finding only half of those surveyed could count on insurance to cover property loss due to theft, serious damage to their home through disaster or weather, or car crash or major breakdown.

Income protection was one of the least favoured forms of insurance, with only 15% of Kiwis taking it out, despite 42% saying their income varied ‘a bit’ or ‘a lot’.

The head of the CFFC, Retirement Commissioner Diane Maxwell, said the Kiwi “she’ll be right” attitude could have something to do with New Zealanders’ lackadaisical attitude toward insurance. Another could be cultural expectations that extended family and community would help in times of hardship.

“We don’t advocate everyone having every form of insurance – some costs you can absorb and your needs change over time – but insurance is there to make sure you don’t incur a big, unexpected bill you can’t pay. The risk is people are thrown into debt.”

Another area of concern was that only 59% of Kiwis aged 18-34 had car insurance, possibly because the cost for under-25s is so high. In Britain, devices placed in cars to assess safe driving have reduced many young people’s insurance premiums by up to 40%. The CFFC is challenging New Zealand insurance companies to consider a similar initiative to make it more affordable for our young people to have insurance if they’re on the road, and to drive more safely.

New Zealanders also tend to under-insure their homes. A 2016 Treasury report estimated 85% of our houses were under-insured by an average of 28%, where the insurance policy would not pay out enough to rebuild a home fully. This equates to a total market under-insurance of $185 billion – more than the $176 billion owner-occupiers currently have in mortgages.

“When something bad happens you want to be looking after your people and your wellbeing, not stressing about how much money you’re going to need to repair the damage,” says Maxwell. “Let the insurers do the heavy lifting financially while you look after the rest.”

For guidance on insurance visit sorted.org.nz

Find out more about Money Week at moneyweek.org.nz

Money Week launch events
Saturday, September 1, 8am-9am
Mangere Market
Site 29
Mangere Town Square
Waddon Place
Direction map and info at http://www.mangeremarkets.co.nz/

Minister Kris Faafoi, Minister of Commerce and Consumer Affairs, and Minister ‘Aupito William Sio, MP for Mangere and Minister for Pacific Peoples will join Diane Maxwell at the CFFC fortune cookie tent to invite marketgoers to break open fortune cookies to see what their financial future might hold.

Monday, September 3, 8am-9am
Atrium on Takutai
Britomart

Join us for a coffee and a bite to eat at the public launch of Sorted Money Week 2018. Take part with passers-by in an interactive weather map installation to gauge how prepared you feel to weather a financial storm. Diane Maxwell

Money Week background:
Sorted’s annual Money Week this year runs from September 3-9. Money Week is an annual, national campaign run by the Commission for Financial Capability to encourage New Zealanders to think about where they’re at with their money, and get sorted if need be. Our theme this year is ‘Weather Life’s Storms’, focusing on three key things people can do to get through unexpected financial hits, be it a dentist’s bill, car repairs or the death of a loved one:
• A buffer savings account – save a little each week to create an emergency savings account for unexpected bills
• Insurance – consider what kind of loss would hurt you financially, what you could absorb and what would be better covered by an insurance company.
• A will – half of New Zealanders do not have one, yet leaving your family without a will can create all sorts of unforeseen problems, including financial issues for your loved ones.

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