Keep Calm and Carry On

General insurance premiums are a hot topic right now. This makes it an ideal time to take a moment and have a calm look at what influences the cost of New Zealanders’ insurance. Obviously, your own claims history will have a bearing, as will national and international trends. It’s also important to remember that premiums don’t rise just because the insurer wants to make more money.

Read on for a helpful overview.

Many New Zealanders are seeing an increase in the cost of their insurance premiums due to the following factors:

  • Increased earthquake premiums. The Canterbury earthquakes changed everything and, so far, claims for the series of seismic events have cost private insurers and the Earthquake Commission $32 billion.
  • Substantial weather-related losses incurred during the last 12 months have run into hundreds of millions of dollars.
  • The impact of environmental factors such as climate change.
  • Risk based pricing models: if you buy a high-risk asset / home, you take on the entire risk for that property. It’s no longer shared in the wider insurance community.
A Changing World

The international insurance market experienced its most expensive year for insurance loss in 2017. A glance at the big news stories shows there were four-plus hurricanes, California wildfires and several large earthquakes throughout the world. As a result, re-insurers – who provide capital to insurers – have become more cautious about what risks they will insure. That’s why in 2018/19 insurance premium prices have increased.

The Australian Connection

In Australia, premiums increased more than any other region. Our three largest insurers in New Zealand are Australian owned which is why premium prices across the Tasman are often reflected in the New Zealand insurance market.

Challenges at Home

Natural disasters such as the Christchurch and Kaikoura earthquakes and the weather events in the North Island affect the cost of premiums across the country. These events then drive up the cost of reinsurance which directly affects your premium. As a result, insurers are reviewing how they charge for risk within higher risk areas. Moving forward, if you live in an area affected by natural disasters, your premiums may reflect that increased risk.

Don’t panic

At AdviceFirst, we believe the price of premiums will continue to rise at a similar rate to the last twelve months. Through all this, it’s important to keep in mind just how valuable insurance is especially when a loss occurs. Always prioritise protecting what matters most to you. Whether you’re a homeowner or a landlord, it’s important to check you have the right amount of cover. And if in doubt, your first step is to talk to your Adviser. We’re here to help you realise a better future whatever the weather.

AdviceFirst is a Financial Advice Provider (FSP23242).