Questions answered: does everyone already have a life insurance policy?

Question from a reader:

The FSC have released their quarterly life insurance snapshot FSC SPOTLIGHT Life Insurance MAR 2023.pdf (hubspotusercontent-na1.net). What I found particularly interesting was there are 4.1 million life insurance covers and New Zealand has about 5.18 million residents. Stats NZ has 986600 people under 15 in 2021 national-population-estimates-at-30-june-2021.xlsx (live.com), and I would assume most under 15 year olds wouldn’t have (or need) life insurance. So, are we basically at market saturation now? Or are there a large number of people with multiple life insurance policies?

Answer:

At Chatswood we do not think that everyone has a life policy and you are right to suspect that multiple policies is a likely explanation. For example, at one point I had five policies with Sovereign, that was a consequence of how increases and additions were done. At the same time I had some group life insurance in the staff scheme, so that made it six. I may have had some credit card insurance too. We work on an average of between two and three policies per person, which leaves the uninsured at about 50% of the working age population. The FSC has also recently done a survey of consumers and their answers indicated that the coverage rate is about 38%. However, consumer surveys about low engagement products such as life insurance are particularly susceptible to response biases. I explore some of these issues in my recent article at goodreturns 'why is is so hard to know how many people have life insurance?' If you would like a more detailed approach to this with the associated modelling and sources please contact us for a copy of our special report on market size and flow.