Flooding in Wairoa after the river burst its banks due to heavy rain from Cyclone Gabrielle. Photo / Wairoa District Council's emergency controller
Flooding in Wairoa after the river burst its banks due to heavy rain from Cyclone Gabrielle. Photo / Wairoa District Council's emergency controller
The chief executive of the country’s largest general insurer warns premiums will continue rising on the back of double-digit growth in the past year.
The amount IAG New Zealand received in premiums rose by 12 per cent in the year to June to NZ$3.6 billion, despite the insurer selling fewerpolicies.
“Significant rate increases are being implemented, with strong momentum building in 2H23 [second half of 2023],” IAG said in its financial results, noting it collected 17.3 per cent more in premiums in the second half of the 2023 financial year than it did in the same period in 2022.
IAG trades under the brands State, AMI, Lantern, NZI and Lumley. It also distributes its products through ASB, Westpac, BNZ and the Co-Operative Bank.
Speaking to the Herald, IAG New Zealand chief executive Amanda Whiting said the insurer was facing high claims costs due to Cyclone Gabrielle and flooding in parts of the North Island.
Its reinsurance costs are also rising, while it continues to grapple with “significant” inflation and supply chain issues.
Whiting was reluctant to put a number on the sorts of premium hikes households and businesses should brace for in the year ahead, noting higher-risk policyholders would face greater increases.
Insurers have been using a more granular approach to price earthquake risk for some years, but have been moving towards doing the same for flood risk to differing degrees.
Whiting wouldn’t say how far down the risk-based pricing pathway IAG was when it came to flood risk, but cautioned, “unless we start managing risk before events, we’re going to continue being in situations where people are worried if they’re able to get insurance”.
“We really need to start planning differently. We [insurers] can’t be the shock absorber that is there for all New Zealanders paying similar rates.”
Whiting told the Herald, “Right now, we’re providing flood cover for everyone… But in 10 years’ time, who knows?”
IAG New Zealand CEO Amanda Whiting.
A year on, and following weather events that saw IAG New Zealand suffer its second and third-largest losses on record, Whiting doubled down on advocating for policymakers to take up the insurer’s three-point plan.
This includes getting Government and the private sector to share more data on flood risk, implementing a National Policy Statement to cease development in flood-prone locations, and establishing a national programme of investment in flood protection.
“I think we’re at a really pivotal point as a country. We need to start making some decisions,” Whiting said.
She said that on the one hand, people want insurers to accurately price risk to incentivise and reward risk reduction and mitigation. But on the other, there’s a desire to keep people insured.
“I hear both sides of the story and I often hear it from the same politicians, almost in the same breath. We have to get the balance right.”
IAG New Zealand reported an insurance profit of A$44 million in the year to June – a drop from A$220m in the 2022 financial year.
It received about 50,000 claims related to Cyclone Gabrielle and flooding in parts of the North Island – three times more claims than it received for weather events last year.
It said it had closed 57 per cent of claims, including 90 per cent of personal motor claims and 63 per cent of content claims.
The 57 per cent of claims closed cost IAG A$284m.
Whiting recognised there were hold-ups when it came to assessing land damage, partly due to geotechnical engineers being swamped with work.
Jenée Tibshraeny is the Herald’s Wellington Business Editor, based in the Parliamentary press gallery. She specialises in government and Reserve Bank policymaking, economics and banking.
