The Extent of Underinsurance: New Zealand Evidence

32 Pages Posted: 8 Jun 2013

See all articles by Michael Naylor

Michael Naylor

Massey University - School of Economics and Finance

Claire D. Matthews

Massey University - School of Economics and Finance

K. Stuart Birks

Date Written: April 20, 2013

Abstract

It has been a common assumption by the insurance industry world-wide that households are under-insured. We examine new evidence for underinsurance using a comprehensive survey of New Zealand households and full life-cycle needs analysis. This survey is unique internationally in that it also covers total and permanent disability, trauma and income protection insurances, as well as examining underinsurance by household type and ethnicity.

We show that analysis of underinsurance needs to be more comprehensive than simple measurement of rates or levels of cover and needs to compare actual coverage levels to adequacy levels. We find no indication that of a crisis in life underinsurance, with rates and levels of life insurance ownership similar to those in the USA and ownership levels correlated to needs for life cover. There is, however, strong evidence that levels of life cover are often poorly chosen, with little relationship between ideal cover and actual cover, indicating household considerations about insurance cover levels are inadequate.

Keywords: personal household behavior, insurance, behavioral finance, ethnicity

JEL Classification: C42, D14, G22, H31, I31

Suggested Citation

Naylor, Michael and Matthews, Claire D. and Birks, K. Stuart, The Extent of Underinsurance: New Zealand Evidence (April 20, 2013). Available at SSRN: https://ssrn.com/abstract=2275665 or http://dx.doi.org/10.2139/ssrn.2275665

Michael Naylor (Contact Author)

Massey University - School of Economics and Finance ( email )

Private Bag 11-222
Palmerston North, 30974
New Zealand

Claire D. Matthews

Massey University - School of Economics and Finance ( email )

Private Bag 11-222
Palmerston North, 30974
New Zealand

No contact information is available for K. Stuart Birks

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