Philip Holland Financial Independence financialindependence

Since my last article I have had a few people ask me this question. In short, it creates a major problem should something go wrong. Firstly let's look at some figures*:

If we look at the penetration of insurance to GDP (Gross Domestic Product) it makes interesting reading – Australia 4.74 per cent; NZ 0.83 per cent.
Now let's look at the average insurance spend per capita:
Australia $2079 USD; UK $3500 USD; USA $4800 USD; NZ $251 USD.
These figures sure give a convincing argument that we are woefully underinsured in New Zealand.

So why are we so far behind? I believe there are two main reasons: Given the high levels of benefits available, many New Zealanders simply choose to have minimal insurance (or none at all) and if something was to go wrong, run the gauntlet of the benefit system. There is also a lack of advisers in the insurance industry helping people to assess and cover their risks. The Kiwi ‘she'll be right' attitude. This does link with the first point that someone else will look after me if something goes wrong.

The problem with these reasons is the pressure is coming on government finances around the world and many of these benefits and support features that so many have relied upon to be there may well not be there in a time of need. For example, ACC has essentially been broke for many years and with pending privatisation a possibility, you can be assured it will be harder to obtain the full benefits.

For many people, it is a social issue of people having to start to take ‘control' of their own future and not relying completely on the government to do so for them. KiwiSaver is another example of getting people to save for their own retirement. It is very clear that NZ Super will slowly diminish during the years ahead.

So make sure you are working with a reputable insurance advisory practice that can help you to maintain ‘control' of your financial life even if a disaster may strike.

* The statistics were supplied by Konnect.

Philip Holland is the managing director for the Financial Independence group, Tauranga's leading specialist insurance and mortgage advisers. A Disclosure Statement is available free of charge on request. The opinions stated in this article are those of the writer and should not be taken as specific advice.