Income protection payouts rise
Income protection and life insurance payouts topped $1.1 billion in 2013, the third consecutive year the industry has paid clients more than $1b in claims, an industry report says.
Financial Services Council (FSC) figures show claims for life and personal income insurance were down $78 million last year compared with 2012
Premiums for life and income protection insurance totalled more than $1.8b in 2013.
Across the industry, life insurance term premium payments rose $60m to just over $1b.
FSC chief executive Peter Neilson said the industry was expanding in personal income protection insurance.
He said annual premium income for individual trauma income insurance, which covers lost income after a stroke, cancer or heart attack, had grown by 58 per cent over the past five years. Other individual income protection insurance premiums had grown by 29 per cent over that time.
"Events like the recent recession and the Christchurch earthquakes have shown people how vulnerable their incomes can really be," Neilson said.
Although many people thought they would be covered by the sickness benefit in the event of health issues affecting their employment, income testing meant about 60 per cent of households would be ineligible.
He said long-term illnesses were twice as likely to strike down employees than accidents and were not covered by ACC.
"We end up with the majority of New Zealanders too rich for government help but too poor to pay the mortgage."
Neilson said that in the past five years, payouts for income protection policies had grown by 95 per cent.
Because growth rates in those claim payouts had exceeded inflation over the same period, it suggested the gap between personal insurance held and the risk exposure was narrowing, he said.
In 2013, payments on the policyholder's death was still the largest claim group, with more than $500m paid out to families.
Neilson said premiums for life insurance was tied to the average mortgage amount, which had grown rapidly in recent years.
The FSC represents nearly 90 per cent of the New Zealand insurance industry.