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In another noteworthy plot point in the Honan story, we welcomed Certus Insurance Brokers (CIBNZ) into the family of brands in March this year. Expanding and diversifying our presence in the New Zealand market, CIBNZ is a world-class general brokerage operating across two sites in central and regional Auckland.
We sat down with General Manager, Mark Gustafson, who shared more about the local insurance market (which has already been impacted by two storm events in 2023), developments to watch now and over the longer term, and some advice he finds himself consistently repeating to clients.
We have been operating for over 20 years and there are 15 of us in the business. Our brokers are all highly experienced and each have at least 15 years’ insurance experience. Our client base is evenly split between small-to-medium enterprises (SME) and personal lines of insurance for private clients. We are known for high quality advice, innovative risk-based solutions and we focus on fostering long-term relationships with our customers and insurers. This has seen us become a successful and trusted brokerage with clients throughout New Zealand.
Damage from the two storm events in January and February this year has generated tens of thousands of claims, estimated to exceed $4 billion in repair and replacement costs. Last year was also a very bad year for storm events so this has come on top of an already stressed system. The damage has not only been to private property but also key infrastructure including roads. The claims losses represent almost half the annual premium pool for New Zealand.
New Zealand is currently grappling with high inflation and rising interest rates that are impacting both consumers and businesses. As a result, discretionary spending is tightening and with rapidly rising premiums, many customers are grappling with affordability issues. This combination of factors has created a challenging environment for many people in the country. It is also going to be a big year politically in New Zealand with the general election in October.
The extent of the damage has overwhelmed many communities and the insurers are really struggling to work through the volume of claims. So there are claims processing delays and leading insurers Vero and NZI have provided brokers with delegated claims authority for some lower value claims. The processing and settlement delays are starting to frustrate customers and we are working hard to have our clients’ claims pushed through and settled as quickly as possible. Claims advocacy is one of the key ways we add value for our clients.
The insurers are also already responding with significant pricing increases. At renewal, we are seeing premium rises of 20-50% in property classes and 10-20% in motor.
With high inflation, higher interest and significantly increasing insurance premiums, insurance affordability is likely to become an issue for clients.
It appears this is more than a hardening of the market and it is likely there will be reduction in willingness to underwrite risks with flood and storm exposures. This may be at an individual risk level or imbedded into insurers’ policy wordings. We saw these kinds of fundamental changes following the Christchurch earthquakes.
Clients are already starting to show higher levels of engagement in their insurance portfolios, this is a good thing that has come out of these unfortunate events because it means customers are better insured instead of “setting and forgetting” their levels of cover.
Reinsurance costs and the impact these will have on insurance pricing and risk appetite.
Automation and digitisation of processes and interactions between intermediaries, insurers and insureds. Technology will help to streamline the way we work, allowing for more efficient processes and faster turnaround times to ensure we maintain our focus on servicing our clients.
Increasing regulation of the insurance industry, which will continue to change our processes and practices to remain complaint and provide high quality customer outcomes.
Make sure you carefully consider your sums insured at each renewal and remember to update them mid-year if there are any material changes. Use experts for valuations and don’t guestimate. I can’t say I have ever heard a customer after a major loss complain, “You advised me to take out too much insurance!”
