Life Insurance Products Missing from the Market

Highlights:

• Reintroduction of With-Profits Products: Hutchinson suggests bringing back low-commission with-profits life insurance products under the current regulatory regime to offer better value for money.
• Value of Annuities: Despite being considered tax inefficient, annuities can be beneficial in means-tested scenarios like aged care support, making them worth reconsidering for future planning.
• Need for Long-Term Care Insurance: With demographic changes in New Zealand, there's a growing need for comprehensive long-term care insurance to cover the evolving elderly care profile.

Russell Hutchinson highlights the gaps in the life and health insurance landscape and identifies several missing products that could benefit consumers.

Disappearance of Traditional Policies

Traditional or with-profits life insurance has almost vanished. This product was criticized for poor value due to high commissions linked to its investment component. Regulatory changes further separated insurance from investment products by imposing lighter regulations on those without investment elements. Hutchinson suggests reintroducing a low-commission with-profits product under the current regulatory regime.

Lack of Annuities

Annuities have also become scarce. Though often seen as tax inefficient, they offer benefits in means-tested scenarios like aged care support. A reinsurer analyst pointed out that annuities can help remove capital from benefit calculations, making them valuable for future planning, especially considering potential wealth taxes.

Need for Long-Term Care Insurance

Long-term care insurance is another missing product. With demographic shifts changing the elderly care profile in New Zealand, there's a growing need for comprehensive coverage in this area. Hutchinson's ongoing market overview on the elderly care sector will provide further insights when published next quarter.

Reconsidering Income Protection

Cancellable income protection, once offered by some insurers, is no longer available. Short-term income protection benefits that end after the claim period could serve as a substitute. Additionally, trauma insurance without a buyback option remains valuable despite being a one-shot product. With Australia's regulatory approach to income protection, this product could be reconsidered.

Expanding the range of insurance products could make coverage more accessible and affordable, attracting consumers currently priced out of the market.

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