Ensuring your Insurance is Sorted

$orted Money Week was launched on September 3-9 with theme of being ready to ‘weather life’s storms, which involves being prepared for unexpected financial setbacks with suitable insurance cover.

 

 

CFFC (Commission for Financial Capability) Retirement Commissioner Diane Maxwell says 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, now in its seventh year.

 

“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 (below).

 

With a Pacific partner, she understands the financial pressures many Pacific families are under. She also admits there’s a lack of trust among the community towards insurance.

 

“When we were engaging, a lot of them said they didn’t have insurance because it costs too much and many believed the companies wouldn’t pay out, anyway,” says Diane.

 

“But the insurance companies legally have to pay. Make them do the heavy lifting.”

 

Money needs to be talked about openly to help people prepare for financial emergencies, and prevent the suffering caused by high-interest debt, says the Minister for Pacific Peoples, Mr Aupito William Sio.

 

Speaking at an event at Mangere Markets on Saturday to preview the start of Money Week, the MP for Mangere saw first-hand the harm done to families and communities by “loan sharks” that offer quick access to high-interest debt.

 

“If families had an emergency savings account they wouldn’t be vulnerable to those organisations,” said Mr Sio.

 

“We need to have open conversations about money to restart a culture of saving, and pass that on to our children.”

 

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%. 

 

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.

 

Maxwell said the Kiwi “she’ll be right” attitude could have something to do the lackadaisical attitude toward insurance. Another is cultural expectations among Pacific people 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 saving, insurance and wills, visit sorted.org.nz.

 

04/09/18