Suncorp’s Jimmy Higgins hopeful insurance premium increases will slow following hefty hikes in 2023

Suncorp New Zealand's reinsurance costs were up 79 per cent following Cyclone Gabrielle. Photo / Mike Scott

Suncorp New Zealand is reporting hefty premium increases, much like the other dominant Australian-owned general insurer in the market, IAG.

Suncorp’s gross written premium (GWP) was 20 per cent higher in the six months to December 31, 2023, than it was during the same period in 2022.

Suncorp sells its products via Vero Intermediated, Vero Liability, Asteron Life, AA Insurance and AA Finance.

Vero Intermediated recorded GWP growth of 17 per cent, while AA Insurance experienced an increase of 25 per cent. Home and motor GWP rose the most.

While a small portion of the growth was attributable to the insurer selling more policies - possibly at the expense of IAG, which lost customers during the same period - the bulk of it was put down to higher premiums.

Speaking to the Herald, Suncorp New Zealand’s chief executive Jimmy Higgins said the insurer had grappled with inflation and higher reinsurance costs, partially due to Cyclone Gabrielle and flooding in the upper North Island last summer.

The amount it spent on reinsurance rose by 79 per cent over the year to $267 million in the six months to December.

“Where there is uncertainty around risk, they [reinsurers] price for it,” Higgins said.

He was hopeful premium growth would slow, with inflation abating. However, he was unsure how satisfied reinsurers would be around flood risk being minimised in New Zealand.

“There’s an indication the reinsurance market is stabilising - fingers crossed we won’t see the severity of the pricing that we’ve seen in the last 12 months,” Higgins said.

“But it’s still uncertain as to how the reinsurers are seeing New Zealand…

“Our job here in New Zealand is to not only better understand our natural hazard risk - through better modelling, better data, flood maps, driven by councils and the like - but also that we need to do something about it.

“We need to show that we are either reducing the risk, or at least mitigating the risk, so that those reinsurers price for that more favourably.”

Higgins said Suncorp, which renews its annual reinsurance contracts every July, was watching reinsurance markets following insurers like IAG and QBE renewing their contracts in January.

Anecdotally, he said the market had stabilised. However, he was wary reinsurers wouldn’t have factored December 2023 floods in North Queensland, and an earthquake in Japan into their pricing ahead of January renewals.

Suncorp buys reinsurance for its New Zealand and Australian businesses in one go, so the price is affected by weather events beyond New Zealand.

Higgins assured Suncorp (which operates in a concentrated general insurance market) wasn’t hiking premiums by more than was necessary.

“We need to keep customers insured, and we want to keep them insured with us,” he said.

Suncorp New Zealand reported a net profit after tax of $94m in the six months to December 2023 - a 3.3 per cent increase from the corresponding period in 2022.

The increase came on the back of its general insurance business becoming more profitable, while its life insurance business suffered a fall in profitability.

The six-month period was benign in terms of bad weather events. While capacity constraints across the economy and inflation more generally saw Suncorp spend more settling claims, high interest rates meant its investment income rose.

A dampener on its result was commission expenses, which rose by 16.4 per cent over the year.

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.