Although NZ life insurance premium income rose during the December quarter, the nation is still underinsured, the NZ Investment Savings and Insurance Association (ISI) says.

Total life insurance premiums rose by 2.1% to $NZ1.78 billion ($1.3 billion) for the quarter, but this was offset by almost flat growth in term life insurance which grew by only 0.3%.

ISI Chairman Sean Carroll says regulatory changes and catastrophes like the Christchurch earthquakes have impacted sales.

“Companies have been distracted with a number of internal and external challenges,” he said.

“Advisers have been dealing with the impact of new regulations and the events in NZ’s second-largest city will have had a major impact on sales activity.”

In light of the uncertainty with natural disasters, NZ trauma insurance reported a 10.6% growth in premiums for the December quarter to $NZ211 million ($154 million).

Income protection insurance also reported some growth, up 2.6% to $NZ242 mullion ($177 million) for the quarter.

Mr Carroll says events like the Christchurch earthquake has highlighted the underinsurance problem in the country.

“If the 2009 Victorian bushfires are any indication, it may be that only 20% -30% of people killed or injured will have been adequately insured,” he said.

Individual life insurance claims from the Victorian bushfires were very few with most Australian life insurers paying out on only one or two claims. A number of those killed were covered by their superannuation funds. but those payments were minimal and in some cases below $100,000.

Mr Carroll has called on the NZ Government to appoint a working group to look at the underinsurance problems, simular to what it has done for increasing the level of savings as a nation.

Meanwhile the ISI has formed its own working group to quantify the level of underinsurance in NZ.

It will also look at the reasons why New Zealanders don’t have enough insurance and measure what the social costs are for the country.

“We already know there is a massive insurance gap in this country and we need to work harder to bridge it,” he said.