Rising insurance costs outpace income growth in New Zealand

Rising insurance costs outpace income growth in New Zealand | Insurance Business New Zealand

Property

Expert outlines alternatives for consumers looking to mitigate costs

Property

By
Roxanne Libatique

Over the past year, homeowners in New Zealand have faced a sharp increase in insurance costs, with premiums rising at a rate six times greater than that of wage growth.

Stats NZ reports indicate a 24.6% rise in home insurance premiums in the year to March, representing the most significant increase since the tumultuous period following the Canterbury earthquakes and during the 1980s. The cost of contents insurance has escalated even more, recording a 28% increase, the highest since 1987.

“Reinsurance – the insurance that insurers take out – the cost of that has increased somewhere in the likes of 25 to 40 per cent, and I think you’re seeing that reflected in premiums,” he said, as reported by NZ Herald.

While premiums experienced a downturn during the mid-1990s, the current trend reflects a significant reversal, driven by more frequent severe weather events. This shift poses ongoing affordability challenges within the insurance industry, according to Faafoi.

Impact of rising insurance costs on consumers

A Consumer NZ survey highlighted the impact of these rising costs on consumers, with over two-thirds expressing concern and about 8% having discontinued their policies due to financial constraints.

Abby Damen, a campaign advisor, recommends several alternatives for consumers looking to mitigate these costs. Strategies include opting for higher deductibles, consolidating various insurance policies to avail of multi-policy discounts, and paying premiums annually.

“The best piece of advice would be to not cancel your house or contents insurance completely. There is always the option of the third-party or burglary-only or fire-only house and contents insurance. It’s a crucial safety net,” she said, as reported by NZ Herald.

Recognising the burden of rising living costs, Faafoi stressed the importance of communication between consumers and insurers.

“Our message to people as if they’re finding those things difficult to speak to the insurers. There are lots of things insurers can do, looking at their policy details to make sure the settings are right for them,” he said.