Closing the mortality protection gap in New Zealand
Our research measures the mortality protection gap in New Zealand for the first time, after surveying consumers and their households earlier this year.
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We estimate the mortality protection gap, the shortfall in financial resources that households need to maintain their standard of living in the event of the death of a primary earner, at USD 435 billion (NZD 670 billion) or more than USD 540 000 for each household, as of 2020.
Almost two thirds of households have some degree of mortality protection gap. The challenge is most acute among young and middle-aged professionals, which represent 47% of our sampled population, but 80% of the total protection gap. We expect the mortality protection gap to grow to more than USD 500 billion (> NZD 750 billion) within the next 10 years, with low interest rates, rising consumption and higher household debt all contributors.
Our survey found New Zealanders to be mindful of mortality risks and aware of the need to prepare financially for the premature death of the primary earner. More than four fifths of those we surveyed believe that losing the income of the primary earner will affect their family significantly, the highest of all advanced Asia Pacific markets we have surveyed to date. However, only 39% of consumers reported owning a life insurance policy, and buying life cover is not their default option for more security.
Closing the MPG in New Zealand would require an additional USD 1.5 billion of annual life insurance premiums. People are often more concerned about their health than mortality risk, and our survey found considerable interest in life insurance bundled with riders such as health insurance, disability/income protection, accident, critical illness (trauma) and mortgage covers.
The COVID-19 pandemic, the greatest health and economic challenge of recent times, is a stark reminder of the fragility of our lives and livelihoods. However, with careful planning and sufficient financial protection, those who have suffered the loss of a loved one can take the time to grieve and recover without the worries of financial stress.