Warning on more uninsured
First release after company switch-up reflects the fluid state of the auto industry, writes Matthew Hansen.
Tā Mark Solomon has sounded a warning about the emergence of a large section of society who he fears will go through life without any form of insurance cover. “For the last four months, I have annoyed everybody I have run into about insurance,” said Solomon, who was knighted for services to Māori and business, at the Insurance Council conference in Auckland earlier this month.
“Do they have cover? And, to be honest, I have been appalled at the answers I have been getting from all across my community,” he said.
Solomon had met many Baby Boomers – people born between 1946 and 1964 – with the complete set of insurance cover: house, car, contents, life and health.
“But there’s another set of the Baby Boomers who have not got to retirement with a big asset base behind them, and insurance – household insurance, life insurance, medical insurance – is a pipe dream. They cannot get there.”
As asset insurance becomes more expensive, a similar scenario is playing out for younger people.
Solomon said his oldest child was covered for everything, but: “My next child down, she has to constantly come to the bank of dad to cover her insurance, because she simply can’t do it.”
She had taken him through the budget she and her partner lived on, and: “There is no way they could pay the insurance, so the bank of dad has covered that for the last three years.
“I have found with my children’s generation there are many that do not have any form of insurance cover,” he said.
“Just two weeks ago, I spoke to a couple. Both work 40 hours a week. They can pay their mortgage. They can cover the insurance on their house. They can cover the insurance on their car, but they cannot cover the contents insurance.”
They had been in their home for nine years.
“I do believe there is a huge issue coming,” Solomon said. “There is a whole class of people in New Zealand who will not have any form of insurance.”
The cost of Solomon’s insurance had risen each year since the earthquakes in Kaikōura and Christchurch, and he expected it to continue to rise.
He was not the only person at the conference who was watching with concern the rising cost of house, contents and car insurance.
Jon Duffy, chief executive of Consumer NZ, said there was an emerging insurance cost crisis. Surveying by the organisation had found two-thirds of people expressing concern about the costs of house insurance.
Over the last 10 years house insurance premiums had nearly doubled, he said, and contents cover had gone up by nearly 50%. Of those homeowners who did not have insurance, 8% were opting out because of the cost, and, Duffy said, “we can see that rising”.
Mostly, the risks people were choosing to drop first were personal risks, cutting back their life and health insurance, while keeping their homes and cars covered, but some had uninsured homes.
That last posed a serious risk that not all people seemed to understand. A disturbingly high proportion did not grasp that having house insurance was necessary to qualify for Toka Tū Ake Earthquake Commission cover, Duffy said.
Insurance experts had raised a number of factors that had driven up the cost of house insurance, including general inflation, construction-cost inflation and the increased cost of reinsurance, a form of insurance bought by insurance companies to ensure they did not go bust when paying claims after natural disasters.
Some homeowners with properties in flood plains, or that were at heightened risk of damage in earthquakes, are being hit with higher premiums as insurers Tower, IAG and Suncorp move further down the path of risk-based pricing.
Amanda Whiting, chief executive of IAG New Zealand, which owns the State, AMI and NZI brands, said people needed to go into home purchases with their eyes open.
Sasha Cowlrick, executive general manager, business, at Suncorp, which owns the Vero brand and has a majority shareholding in AA Insurance, said: “Over time our understanding of risk has changed.”
But Cowlrick also blamed governments, saying 45% of the premium cost was made up of tax and levies.
Work to become more efficient, including the increased use of AI, could make insurers more efficient, but she said: “The wriggle room we have as insurers to manage affordability by ourselves in isolation is not great as some might think.”
Suncorp had created a working group on affordability, which sought to work out which of its customers was most likely to be facing affordability issues, and leaving the insurer.
“We’ve been able to help 85% of customers make different choices, and keep their insurance,” Cowlrick said.
That included letting people who have lost their jobs have insurance “premium waivers”, effectively giving policyholders free cover for a short time.
Natural disasters reveal the true level of insurance cover around the country, with earthquakes in Christchurch and Kaikōura, flooding in Auckland and the land collapses of Cyclone Gabrielle last year all revealing pockets of uninsured and under-insured people.
James Beard, deputy secretary for macroeconomics and growth at the Treasury, said that after Cyclone Gabrielle the Treasury found that in some communities fewer than half of households were insured.
That had implications for the Crown’s fiscal position because it was always hard for a government to refuse to “push back” and not bail out uninsured households after natural disasters.
The Crown retained what he called fiscal buffers in order to be able to allow it to handle those shocks, but with an ageing population, and climate risk rising, the Crown’s ability to manage those shocks would be reduced, he said.
Climate risk is believed by many to be a factor behind rising insurance costs, but Chris Mackinnon from Lloyd’s Australia said when Lloyd’s crunched its claims data from the past 19 years, it did not find the fingerprints of climate change on natural catastrophe claims.
“We are not seeing a significant increase in ‘nat cat’ losses associated with climate change,” he said. “The reality is that this is terrifying because what we are seeing at the moment does not even take into account the onslaught of climate change.
“We’ve probably got about another five years before we really see these numbers hit home pretty hard.”
The recipe for keeping New Zealand insured was complex, conference experts agreed.
It involved reducing inflation, especially construction-cost inflation, but it also involved the country beefing up its natural disaster defences, ceasing building in disaster-prone places and retreating from places where homes should never have been built.
“The game is reducing risk,” Beard said. Nigel Bickle, chief executive of Hastings District Council, said the names of some of the places hit hard in Cyclone Gabrielle illustrated how homes had been built in high-risk spots. Those included Swamp Rd, Riverbend Rd, Awatoto and Te Awa.
“Over our history we haven’t made the best planning decisions,” he said.
Some communities were founded hundreds of years ago, and their precious community infrastructure could also be lost.
Solomon said: “Takutai o Te Titi Marae in Colac Bay (in Southland) have had the waves smash the doors open on their wharenui.
“Te Tauraka Waka a Māui marae in southwestern Bruce Bay (80km from Haast) have had the waves come across the main road right across the marae ātea.’’
Those marae may not be there in a decade, he said.
The 2016 Kaikōura earthquake caused such changes to the seabed near his hometown of Oaro (in north Canterbury) that the community there would lose 27 to 30 metres from the frontage to the coast.
His whānau had lived there for 14 generations, and he said it was highly debatable whether it would still be in that community at the end of the century.
As insurance became increasingly expensive, homeowners might also have to put up with more limited cover, or novel forms of insurance, said the Treasury’s Beard, like parametric insurance, which paid out a fixed sum when a defined event occurred, such as a cyclone.
Those policies provided payouts, but not full cover, to give people the ability to “start moving on”, Beard said.
Concerns were raised about competition, with IAG and Suncorp dominating the house and contents insurance markets.
Beard said a Commerce Commission market study would be the way to examine competition in the insurance market.
IAG NZ’s Whiting foresaw a lot of change for the country in coming years, with the costs of that change falling unevenly. “If we are going to do all these things, some will be winners and some will be losers.’’
Alot of clichés are clichés because they’re true. And, in the motoring world right now, one of the most commonly repeated clichés is the theme of industry change. Yesterday’s innovation heroes are perceived as today’s technology stragglers. New brands you’ve never heard of are arriving on the scene and tearing down the establishment. The chief executive of one of the most important carmakers on the planet continues to post daily on social media like an angsty teenager.
I say all of this because for some, the name ‘KGM Torres EVX’ will mean nothing. But it’s actually a perfect illustration of all of the above – a marker of how changeable the industry is right now. KGM is the new name for SsangYong worldwide, with the switch-up becoming reality in New Zealand this month. The Torres is the brand’s first new model since the change. And, its newly launched fully electric EVX model shown here, while not without fault, has immediately rocketed into fully electric vehicle contention.
Make me an instant expert: what do I need to know?
KGM’s Torres line-up is potentially going to become quite the behemoth, with an electric ute, coupe, and hybrid powertrain options all coming in the next 18 months or so. For now, though, there are three key models to choose from; the 2WD petrol, AWD petrol, and this fully electric EVX shown here. The two dino-fuelled models are due to arrive in showrooms in May, while the first EVXs are on the ground now.
The Torres in all of its forms is a deceptively large vehicle. Longer than the SsangYong Korando, Toyota RAV4, and Kia Sportage, and a pinch shorter than a Tesla Model Y. Space was clearly a big point of interest in the nameplate’s development as the interior space is enormous, with near segment-leading head and legroom in the back seat and a huge 800L boot space area.
The 2WD and AWD petrol models start at $49,990 and $54,990 apiece, while this EVX starts at $67,990 (with an introductory price of $66,990 for the first 40 units in the country). Each model is offered in a single, well-optioned spec. For now, at least.
For your money, you get a 150kW/339Nm electric motor paired to a 73.4kWh LFP BYD Blade battery and front-wheel drive. Range on the WLTP cycle is rated at 462km, with charging speeds of up to 145kW on DC fast chargers claimed (a DC charge from 10% to 80% can take as little as 37 minutes).
It is rated to tow up to 1500kg braked, and it comes with a vehicle-to-load (V2L) connector, making it a handy extra power source in the event of a power cut – or if you want to whip out an airfryer at the beach like some kind of sicko.
The copper-trimmed cabin is led by dual 12.3-inch screens featuring wireless Apple CarPlay and Android Auto, heated and ventilated front seats, heated rears, and a neat Pet Mode function that can leave air conditioning on for your furry friends if you need to leave them in the car briefly.
What’s it like to drive?
Our drive in the EVX was only from the Auckland CBD out to Riverhead, meaning there’s plenty more to learn about this electric crossover from a longer journey.
Behind the wheel of the plug-in Torres, the overarching feeling is one of calm. Not unlike the Toyota bZ4X and Subaru Solterra we tested recently, the EVX feels very conventional and comfortable from the cockpit. Its suspension tune is supple and well weighted for New Zealand roads, without feeling totally disconnected from the black stuff. There’s body roll at pace, but that’s a trade-off the overwhelming majority of customers will likely welcome.
It’s not all that quick, hitting 100kph in 8.1 seconds. But that will still feel plenty brisk to anyone hopping out of an internal combustion engine equivalent thanks to the instantaneous nature of electric power delivery. Interior quality is a step above what we’ve previously seen from SsangYong products of old, particularly in the design and software department. Barring seats that felt a little wanting for support, the EVX is a nice place to sit.
Where things fall apart somewhat for the Torres is in its driver assist software. The lane-keep assist in our drive car repeatedly failed to recognise painted lane markers, often specifically the centre line. The car’s driver monitoring system would trigger and instruct drivers to take a break every 10 minutes or so with an unnecessarily long warning chime – even if the driver’s eyes were on the road the whole time. To add insult to injury, it appeared that there was no way to turn off the warning in the car’s software. KGM is aware of both issues, and will look into a software update.
Why would I buy it?
Hard comparing the Torres EVX to the Tesla Model Y doesn’t really do the value of the model justice. On spec and sizing, it is a genuine rival for a large portion of the more expensive $70,000-$80,000 EV crowd – from the Hyundai Ioniq 5 and Kia EV6 to the Ford Mustang Mach-E and Skoda Enyaq. Couple the value with the clear practicality, comfort, and proven battery hardware, and it’s hard to see the catch to Korea’s latest EV.
Why wouldn’t I buy it?
KGM acknowledges that the biggest challenge it faces is building brand equity. While the EVX is more distinctive-looking than most of its peers, we know that plenty of EV enthusiasts are also brandaligned diehards. The promise that a hybrid-powered Torres is on the way might lure traditionalist customers away from the dedicated plug-in alternative.