Fire & General premium increases explained
You may have noticed that this year your total insurance cost has increased, we wanted to give you some information to understand why that is.
Part of the increase is directly due to Insurers honouring their policies and paying more and higher value claims, with Insurers covering meth contamination, increased building repair costs, major earthquake damage from Kaikoura, increases to vehicle repair costs etc. The other part of the increase is from insurers having to collect government levies for the Earthquake Commission and the Fire Service.
There are many components that have compounded to create this jump in total cost, not least of which is changes to Government Earthquake Commission Levies (on domestic properties) and Fire Service Levies on all commercial and domestic property and vehicles.
All Insurers must charge these increased Government Levies and pass them straight on to the Government and of course GST also applies on top.
We will always do our best to ensure that you have an excellent cover protecting your assets. If you were to take an inferior cover, you would still be obliged to pay all the Government Levies so the small saving between the cost of an excellent cover versus an inferior cover makes it even more valuable to have the right cover protecting your assets.
What is the overall impact of Government Levy changes:
On an Owner-Occupied Dwelling: $92 per year
Personal Contents: $18.40 per year
Rental Property: $110.40 per year + Additional Cost of Methamphetamine Contamination as below
Vehicle (Personal or Business) $2.73 per vehicle per year
Commercial Property: $3 per $10,000 per year ($300+GST for a $1m Building)
Methamphetamine contamination on rental properties - Depending on the insurer and quality of cover, this adds approximately an additional $207 per year per rental property depending on the extent of coverage.
Below we have outlined the impact of increases in Government charges and claims events and how this alters your total insurance cost this year.
Compulsory Government Fire Service Levies – Up 40%
From 1 July 2017, the Government will increase the levy collected to fund the Fire Service by 40%. Unfortunately, the method of collection for funding the Fire service is through levies charged on Insurance policies on all property, commercial and domestic and all vehicles. The amount of the levy is legislated and is unavoidable. The reason for the levy is to fund all the changes and services within the Fire Service and will result in increased funding to the Fire Service of $80m per year.
Compulsory Government Earthquake Commission Levies – Up 33%
From 1 November 2017, the Government has increased the levies charged by the Earthquake Commission by 33%. The Earthquake Commission provides coverage for the first $100,000 of damage sustained to domestic dwellings due to an Earthquake, Volcanic or Slip Event. This increase in the levy means the total levy is now 4 times higher than it was prior to 2012. The Government has Reinsurance Cover and the excess is $1.75b. The current charges would have taken 30 years to build the fund back up to be enough to cover one major event which is why the rate had to increase.
Increase in Insurance Costs following last years $3b Single Event - Kaikoura Earthquake
Kaikoura was a much costlier event than most people would expect. In fact, it was the 7th biggest loss event for Insurers anywhere in the world in 2016 with over $3b in Insurance Claims (over 30,000)
Increase in Insurer Claims Costs for Vehicles – Up 20%
While cars are getting “smarter”, much of the technology is designed to protect the safety of the drivers rather than to reduce the cost of accidents. In fact, now many of the safety features such as reversing cameras, sensors and air bags add considerably to the repair costs of vehicles and even if you don’t have those features the costs for hitting a vehicle that does is significant. Insurers are seeing 20% increases in Claims Costs due to these new technologies and added congestion on our roads.
Other Influences Affecting Claims Costs
The damage caused by use of methamphetamine and resulting contamination resulted in approximately $25m of damage in NZ last year.
Construction Inflation is another significant factor in repair and rebuilding costs, with a tight construction sector causing the cost of building the same property this year to be approximately 7% more than last year.
A change to the Health and Safety Legislation has also increased costs. As an example, it may mean that scaffolding must be used where previously a ladder would suffice.
While there are unfortunately a current set of factors conspiring to increase the total cost of your insurance cover, we will always do our best to ensure that you get the best value you can in the market from any money you spend on protecting your assets and business.