MoneyHub’s continued investigation and review of financial products reveals a lack of suitable insurance products targeting people with a low income. While most policies offer monthly payments that invariable help customers to spread payments over the year, more often than not the total cost of these monthly payments can be 10-20% higher than if the policy was pre-paid upfront.
Senior Researcher Christopher Walsh comments:
“Our car insurance research, as an example, suggested that there were instances where policies for the same car would cost more in low income areas than wealthier suburbs”.
“An ideal low-income insurance policy would have a low excess and monthly payments in line with the annual policy price. We are realistic that insurance is a business, but as the situation is today, those with the lowest incomes will often pay the most for their insurance needs one way or another”.
“It’s absolutely critical that to build up financial resilience among every New Zealander, there needs to be advancements in the availability of affordable, accessible and appropriate financial products and services”.
“When it comes to car insurance, we’ve been told by MoneyHub users that an insurance excess is a financial shock in itself – for example, paying $500 to be able to claim on a policy to repair a fully insured”.
“Low income New Zealanders are most affected by the rising costs of insurance premiums as more of their income as a percentage is allocated to essential insurance. Across the income spectrum, MoneyHub users have reported being uncertain about whether or not they need specific insurance. And if they decide to purchase, they are often unfamiliar with the fine print, terms and conditions as well as exclusions. This can lead to inappropriate insurance being purchased”.
We believe that there is a growing level of mistrust in the value and purpose of insurance policies sold by banks who continue to aggressively push non-banking products. At the most basic level, low-income individuals need to have access to financial products that protect them and aid their financial resilience when it comes to unplanned events. Contents insurance is often more expensive if paid monthly rather than annually, and households in lower income areas can pay more for policies based on the risk of burglary”.
“Financial Resilience is something every New Zealander should be able to aim for, and there are many resources from Sorted.org.nz, Citizens Advice Bureau and various budgeting services inform and educate everyday New Zealanders. We continue to see hyperbolic engagement with our insurance guides and continuous positive user feedback. We applaud the Commission for Financial Capability for identifying the growing need for individual Financial Resilience and dedicating the upcoming Money Week 2018 to this very important issue”.