The insurance industry’s “risk-based” pricing model may be hurting businesses in Wellington, according to a recent survey.
The Wellington Chamber of Commerce’s latest business confidence survey found that 30% of respondents have experienced “significantly increasing premiums” over the past three years. The survey also revealed that half of Wellington businesses have faced difficulties purchasing insurance because of a “rapidly changing insurance market.”
The survey was conducted over three weeks in September and received over 200 responses from businesses in the Wellington area.
“Rising premiums for business and commercial property insurance is putting the strain on local businesses, even affecting some of their operations,” said John Milford, chief executive at the Wellington Chamber of Commerce. “The insurance market has changed a lot in the past few years. Wellington has been shaken by several moderate earthquakes, and insurance companies are now moving to so-called ‘risk-based pricing.’ All this has combined to mean higher premiums for Wellingtonians and it is starting to [have an] impact on the operations of local businesses.”
Milford said that feedback from survey respondents indicated that insurance companies are inserting more exclusion clauses into contracts – with a few businesses even denied coverage completely.
“Previously, the Chamber has highlighted the example of a typical commercial office block in Wellington that saw its insurance premiums rise 220% in just four years – from $99,000 in 2016 to almost $320,000 this year,” he said. “These higher premiums for commercial properties flow through into higher rents for tenants. This adds to the cost of doing business at the same time as the council is increasing rates and compliance costs generally are rising.”
Milford urged the city’s government to step in and help its business community grapple with the problem.
“The Wellington Mayoral Taskforce on insurance is currently developing recommendations for government action, and we look forward to seeing what they come up with as a matter of urgency,” he said.