Why are New Zealand’s insurance premiums increasing?
Many Kiwis around the country are already feeling the strain of insurance premium increases. Some policies may have increased a little, but there are some that have increased a lot, including house insurance. Rather than rushing to take it up with your insurer, let’s first look at why these increases are happening across all insurance providers across the country.
Every year, insurers review all premiums to calculate pricing that accounts for any changes to the cost of providing cover. For example, what may have been enough to cover a home 10 years ago is definitely not enough to rebuild now.
Other factors also need to be taken into consideration, including inflation and environmental changes. There’s a lot that goes into calculating premiums, and unfortunately, events from the last year have meant that premiums need to be higher to ensure you have the right cover.
Here are some of the main causes of premium increases in New Zealand:
Claims and losses
Whenever insurers face a surge in claims, this affects insurance premiums. When two of the most significant weather events New Zealand has seen in a while happened around the same time, insurers were faced with some of the largest claim volumes they’ve ever had. As of June 2023, insurers had paid out almost $2 billion in claims from the Auckland Anniversary floods and Cyclone Gabrielle.
Underwriting
Underwriting is the process of assessing the amount of risk that a potential insurer might be taking on when they cover you. Insurance premiums are, understandably, also calculated based on your risk profile. For example, if you have a large property that often floods, your premiums will be much higher. This will unfortunately be the case going forward for those who have claimed when their properties became uninhabitable in this year’s floods.
Inflation
As we mentioned, inflation plays a role in how insurers calculate your premiums. You can read more about insurance and inflation in our blog, Have you factored inflation into your insurance? As we all know, inflation is currently very high, and so that means that your cover needs to keep up; as the cost of our assets rises, so should the value of the cover we have for those items.
How can you ensure your premiums are correct?
Check your sum insured
Your sum insured refers to the total amount your home and contents are covered for. You specify this amount when you take out cover, so it’s important to review this regularly to make sure you still have the right cover in place–too much or too little could leave you out of pocket.
Look at your excess options
Often, insurers allow you to pay more in excess to reduce your premiums. While that might not always be the case, it’s a good idea to have a chat with a financial adviser to help you figure out where you might be able to balance out your excess and premiums.
Take an inventory
Have you recently bought or sold any valuable items? If so, you might need to adjust your policy and therefore your premiums to make sure that your new item is covered and that any sold items are no longer included.
For more advice around how premiums work and how you can make your insurance work for you and your budget,
get in touch with us today.
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