Update on Insurance Costs

Inflation now sits at 2.2% as reported for the September 24 quarter. We are now within the Reserve Bank’s target range of 1%-3%. A significant aspect of the overall inflation picture remains non-tradable inflation, which currently stands at circa 5.0% (October 24). Non-tradable inflation reflects costs such as insurance premiums, services, and council rates.

As mentioned previously we are starting to see premium rates flatten out and we are expecting (assuming no large-scale insurable events/losses) this trend to continue well into 2025.

2024 has proven to be a difficult year for many with rising costs and an unstable job’s market. Stable premium rates especially when it comes to well managed properties, businesses and/or assets located in low flood zones is a welcomed change. Risk based pricing models will naturally seek out those preferred risks and attract lower and competitive premiums. Please keep that in mind with any investment decision you may be looking at.

Trends in the insurance space:

• Inflationary pressures within claim settlements and associated costs to insure are settling.
• Reinstatement values should be reviewed to ensure your sum insured reflects current and adjusted replacement costs.
• We expect Insurers to start chasing premium growth and a desire to improve risk numbers and that is a good thing triggering more competition amongst all Insurers.
• Reinsurance costs make up a large portion of our overall insurance premiums. We expect reinsurance costs to flatten out with lower interest rates (how fast or slow that process is will remain a moot point heading into 2025) and therefore we expect additional capacity to enter the market seeking better returns.
• Climate change and the related costs are starting to influence reinsurance markets, and we will need to adjust our total reliance on the insurance model, or insurers/reinsurers will do it for us. Property owners, councils and central government all need to plan and contribute towards ways to reduce and manage climate risk. It is likely that insurers will put further policy restrictions around flood prone areas to reduce significant exposure to large-scale flood losses.
• The Fire and Emergency (FENZ) levy has increased by 12.7% from 01 July 2024 – The levy is payable on all contracts of fire insurance for property in New Zealand and collected via applicable insurance policies FENZ Levy detail

Green Shoots - Some Positives To Acknowledge

Inflation is now back within the RBNZ target band of 1-3%

• We are expected to be in a rate cutting cycle throughout 2025.
• Previous supply chain issues and those related costs have normalised for now, construction inflation has reduced. Assuming your cover is reviewed annually your sum insured in many cases should remain stable with expected careful and considered review.
• Since the January/February 2023 cyclone and floods in Auckland and Hawkes Bay, we haven't experienced another large-scale weather event that would impact the reinsurance market. This has helped stabilise our market for now.
• We are also seeing certain new markets enter NZ for commercial related risks, likely due to current pricing, and this should benefit certain commercial clients.

Our Tips for Navigating the Current Insurance Cycle and how aibGroup can help.

Talk to our advisers about your situation, assets, and needs.

• For buildings and houses, obtain an insurance valuation to help eliminate the guesswork from online tools or outdated inflation rates. Using a Valuer can also help protect you if the value is incorrect.
• Our team will present available options, such as higher excesses, and provide you with the right advice on your valuable cover. The benefits of using our services, obtaining advice, and building a relationship with your insurer and us remains crucial today. Contacting us is easy, and we always work as your advocate, aiming for a close, trustworthy relationship.

We review your cover and make recommendations and amendments as soon as possible. Our highly experienced claims team works independently from the insurer to ensure you get the full benefits from your policy when needed.

Other ways we can add value to your insurance journey include:

• Access to fast-track claims processes with some insurers, and close collaboration with insurance assessors for non-fast-track claims to ensure your claims are handled quickly and correctly. We will regularly update you on the status of your claim(s).
• Referrals to insurance valuers at discounted rates through our partnership with NZbrokers.
• Our years of experience and understanding of the local insurance market, which have delivered many positive results for clients over the years.
• A team culture focused on ongoing development, keeping our finger on the pulse.

Additionally, like many of our clients, we support local non-profit community organisations through sponsorship and volunteering, continuing to build those partnerships and connections.

Contact Us Today
Personal Lines: [email protected]
Commercial Risk: [email protected]