It has been established that the insurance industry is facing climate change risks, and that the sector needs to respond.
Insurance law firm Chapman Tripp has already outlined possible responses by insurers and businesses, both in the long and short term.
Now, in its report, Chapman Tripp has highlighted future insurance trends that it is anticipating. These include a greater focus on bespoke products, and more “shopping around” by customers to ensure the best insurance coverage possible; a higher level of engagement by the insured, involving senior managers and the board; and more detailed questioning by the insurer as insurance policies come up for renewal. The law firm said it would recommend insurers have more tailored policies reflecting the specific risk profile of the insured rather than that of the generic industry.
Chapman Tripp also suggests that parametric insurance could have a role in New Zealand’s agricultural economy, as the regulatory environment is favourable to the introduction of new insurance products.
“These insurances are intended to complement traditional insurance and are based on a parameter that is critical to the client’s business. In the climate context this could be rainfall levels or wind speed,” the firm said. “The payment amount is fixed in advance and the contract is paid out immediately when the threshold condition is met or exceeded, regardless of whether a loss has occurred.
“The advantage to businesses of these arrangements is that the immediate pay-out can be used to initiate mitigation strategies and to keep the business afloat and wages paid while these strategies are engaged,” it added.