Insurers call for focus on climate as costs rise
Commerce Minister David Clark is considering whether the competition watchdog should launch a study into the insurance sector to ensure it is ‘‘operating as it should’’.
Commerce Minister David Clark is dangling the threat of a market study over the insurance sector as Treasury monitors its charges, but the peak body representing insurers warns an ‘‘urgent focus’’ on climate change is needed to stop premiums becoming unaffordable.
Clark is considering whether the competition watchdog should launch a study into the insurance sector to ensure it is ‘‘operating as it should’’ but is waiting for official advice.
Meanwhile, Treasury is ‘‘closely’’ monitoring on whether there is a change in prices and uptake after the Earthquake Commission doubled how much it would cover for homes damaged in a natural disaster from $150,000 to $300,000, in the hope it would drive down insurance premiums.
‘‘I’d expect to see that flow competitively into the market,’’ he said in the Beehive yesterday.
‘‘Treasury will be monitoring that closely, so that sector knows that that’s an opportunity that might sit there for them. Having said that, the electricity sector is another one that’s been suggested.’’
He said he had ‘‘signalled to the industry’’ that he was considering the need for a market study to assure consumers the market was operating as it should.
The monitoring work includes regular data collection which gives a highlevel view on insurance pricing by regions as well as tracking insurance prices across time.
Clark, announcing a new open banking initiative expected to increase competition in the sector and drive down fees for customers, said insurance and the electricity sector were two ‘‘vying’’ for a market study.
But Insurers Council of New Zealand chief executive Tim Grafton said there was ‘‘no need’’ for a market study, instead calling for ‘‘an urgent focus on measures to reduce the climate change impacts which will support the affordability of insurance’’.
The insurance sector was under pressure, with weather events linked to climate change, a shortage of building materials, and supply chain disruptions as well as global reinsurance costs expected to push claim costs higher.
‘‘All these factors are outside of insurers’ control. So, a lot needs to be unpicked, the causes sourced and carefully reflected on,’’ he said.
The private insurance sector has 89 licensed insurers, more than half of which are foreign owned, with assets of $27 billion – 7.5% of gross domestic product. Foreign-owned insurers account for about 85% of these assets, according to the Reserve Bank.