SOME THOUGHTS ON THE DEVELOPMENT AND STRUCTURE OF THE NEW ZEALAND LIFE INSURANCE INDUSTRY

Abstract

This paper seeks to explain key characteristics of the New Zealand life insurance industry, in particular the important role played by overseas-controlled mutual companies, and the dearth of regulation relative to other countries. It proposes that the dominance of mutual companies reflects the historical development of the New Zealand life insurance market. It also examines how agency theory may help to explain how the market has come to be dominated by mutual companies, and suggests that the unregulated nature of the life insurance industry may reflect the New Zealand government's historical role of direct intervention in the market through the Government Life Office. Further light on this issue is shed by the economic theory of regulation. This theory suggests that cartelisation and reinsurance may help to explain the existence of the unregulated insurance market in New Zealand. The paper concludes that many socio-economic and historical reasons may account for the distinctive features of the New Zealand life insurance industry. The possibilities are presented in this paper as a stimulus for further insurance markets-based research.