Hawkes's Bay leaders address findings of Cyclone Gabrielle review.
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Insurance claims for crime jumped in the past two years, and stress and mental health claims are also on the rise.
The market update from business insurance broker Marsh New Zealand said that over the past 12 to 24 months, insurers experienced an increase in claims activity against crime policies.
“Contributing factors include the cost-of-living crisis, economic hardship, technology advances and social engineering fraud,” Marsh said in the report.
Social engineering fraud basically refers to scams, such as phishing and other nefarious practices aimed at tricking people into handing over personal or financial information.
In the crime insurance class, Marsh said premiums were up 15 to 25 per cent last year.
“While protocols may be effective in an office work environment, a remote workforce has created new risks and challenges.”
Meanwhile, natural disasters had a big impact on claims here and abroad, according to the Marsh report.
It said economic and climate conditions worldwide were influencing the outlook for Kiwi customers and insurers.
It said premium rate rises of 12-25 per cent were reported after the January 2023 Auckland Anniversary floods and then Cyclone Gabrielle.
“Additionally, globally, the rising cost of insured natural catastrophe events mean significantly less availability of reinsurance capacity, and inflationary pressure led to double-digit premium rises,” the Marsh annual report added.
“Combined losses from Auckland’s January floods and Cyclone Gabrielle are estimated to total $3.5 billion, making them the largest non-earthquake events in New Zealand history.”
Social engineering fraud, or scams, caused a jump in insurance claims, according to the Marsh annual review. Photo / Jason Dorday, NZME
The biggest insurance event worldwide, according to the report, was a United States tornado and storm complex in March last year.
That event resulted in insurance losses of US$4.3b (NZ$7.2b).
Challenges in the construction sector were also impacting insurance.
“Construction insurance market conditions remain challenging and rate increases are likely to continue in 2024 as a result of continued claims pressure,” Marsh said.
“Similar to property insurance, risks based in high natural catastrophe zones, such as Wellington, remain particularly challenging.”
The report said there was some room for optimism though.
“Notwithstanding the challenges experienced in certain segments of the insurance market, 2023 was a standout year for Lloyds’ of London in respect of underwriting results.
“If Lloyd’s sustainable and profitable growth and performance continue into 2024, we expect this to have a positive impact on the local New Zealand insurance market,” the report added.
“Challenging conditions have persisted into 2024 for the New Zealand property insurance market, although there are signs of improvement as we progress further into the year, barring unforeseen changes in conditions.”
In liability insurance, including that related to directors and officers, the market outlook was generally positive last year.
That, Marsh said, was due to increased stability and rate reductions for well-managed risks in that type of insurance.
The report also said many insurers had grown unwilling to keep offering “one loss” cover, and instead were reverting to an “aggregate limit” basis of cover.
Marsh said some such changes could significantly shift the overall cost versus benefits of the coverage.
That meant it was important for customers to review renewal terms carefully and have a good understanding of all changes to terms and conditions.
