Insurance Council of New Zealand (ICNZ) chief executive Tim Grafton acknowledged the substantial increase in insurance premiums, attributing this to several factors, including heightened reinsurance rates caused by severe weather events globally.
Recent data from Stats NZ indicates that while the annual inflation rate in New Zealand decreased from 5.6% to 4.7% in the last quarter of the previous year, it remains above the Reserve Bank's target range of 1% to 3%. This persistent high rate is attributed to factors such as elevated rents, rates, and building costs.
A primary contributor to this increase has been the rising cost of housing, which has offset reductions in food and fuel prices. In an RNZ report, homeowners have expressed concerns about the growing financial burden due to increased rates and insurance costs. Some residents have even relocated to more affordable areas, like the Kāpiti Coast, in response to these rising expenses. Furthermore, there are reports of significant hikes in insurance premiums over the past two years.
“Reinsurance costs have gone up between 25 and 40%, and they account for about 20 cents in the dollar for the premium that people pay,” Grafton said. “The reason that's gone up is because there have been a significant sharp increase in extreme weather events.”
Locally, events such as the Auckland Anniversary floods and Cyclone Gabrielle have strained the finances of domestic insurers. Additionally, ongoing building cost inflation has contributed to the upward pressure on insurance premiums. Grafton also mentioned that the Earthquake Commission's decision to increase its coverage led to a one-off hike in its levy last year, further impacting consumers.
These combined factors illustrate the complex interplay of global and local elements influencing New Zealand's insurance market and overall inflationary trends.
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