Insurance brokers have warned that higher taxes and a changing market could see the cost of insuring some buildings rise by more than 50% soon.
The comments follow the country’s two largest general insurers- - IAG and Suncorp -- flagging premium increases in their latest financial results, according to a report posted on interest.co.nz. Both insurers noted rising claims costs, aside from payouts for last November's Kaikoura quake.
Runacres Insurance Managing Director David Crick said: “Immediately following the Christchurch earthquakes in 2010 and 2011, we saw insurance costs jump by up to five times higher than the year prior. However, over the past 12-18 months, we have seen a sustained drop in the cost to insure as insurers looked to grow their client base and new competitors entered the market.
“We expect that trend to change in 2017 and 2018 with the impact of increased taxes on insurance and the influence of other market forces coming through such as the Kaikoura earthquakes and limited supply of cover from some insurers.”
The CEO of NZbrokers, the country’s second largest insurance brokerage collective, Ms Jo Mason, agrees.
She maintains competitive changes in the market, the rising cost of cover for methamphetamine damage in tenanted buildings, as well as increases in Earthquake Commission (EQC) and the fire service levies will see the cost to insure some properties increase by up to 56%.
“While the fire service and EQC are essential factors in managing the risk of home ownership, it's a real concern to see that this increase is going to hit many of those in lower value housing disproportionately higher.”
As for the taxes the government tacks on to private insurance premiums, as of July, the levy to fund the new fire service - Fire and Emergency New Zealand - was bumped up from 7.6 cents to 10.6 cents per $100 of insured property. The cap for residential property insurance was extended from NZ$76 (US$55) to NZ$106. In November, the EQC levy will increase from 15 cents to 20 cents per $100 of home insurance cover, with the cap pushed out from NZ$207 to NZ$276.