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Insurance rates hike expected in wake of cyclone devastation

Updated: Feb 20, 2023

While New Zealand deals with the devastation of Cyclone Gabrielle, the insurance industry is reporting that rates hikes will be inevitable.


For now the focus is on relief and recovery. Many centres in the Hawkes Bay region of New Zealand still do not have power and people are dealing with aftermath of the cyclone and flooding just two weeks ago.


Yesterday New Zealand Prime Minister Chris Hipkins said more than 9,000 people were expected to be displaced across the Hawke’s Bay region which remained in an urgent response mode.


At the time of writing, five people were reported to have died but the prime minister believes there will be more. A national state of emergency continued to be in place while evacuations in areas affected by Cyclone Gabrielle continued.


Rescue and recovery efforts were also hampered by telephone commuincations being impacted, people were unable to communicate with each other or access the internet to check on the latest information.



Even before Cyclone Gabrielle had hit, insurers were already expecting the worst.


Insurance Council of New Zealand Te Kāhui Inihua o Aotearoa (ICNZ) Chief Executive, Tim Grafton said: “While Gabrielle is yet to pass, insurers are already prepared with all available staff on hand to get on with accepting claims, prioritising those displaced from their homes or otherwise needing extra care.”


Insurers are already dealing with more than an estimated 40,000 claims so far arising from New Zealand’s largest climate event to date over 27 January and 2 February.


“People should put their own safety, and that of their family, first,” said Grafton. “House and contents policies typically include temporary accommodation benefits, including those held by renters. If it’s not possible to stay in your home, call your insurer as soon as possible. If you are able to stay in your home, it is best to lodge your insurance claim online.”


Insurers had already mobilised staff from across New Zealand, Australia and further afield to help deal with claims from earlier in the month. They are already in place, ready to continue to systematically work through claims.


Talking to Insurance Business, the chief executive of Howden Broking New Zealand, René Hattingh, said: “Our hearts go out to those clients who have suffered losses – not only did they need to brace for the storms, but they will now need to deal with the impacts of the extreme weather and prepare financially for the impact of increased insurance premiums. So, with relation to property insurance, it’s going to be an interesting and challenging market this year.”


“It’s definitely going to be a challenging market going forward. We’re expecting price increases of between 20% and 30% on clean risks where no losses have been incurred. For those risks where claims have been made, the increases will be substantial"


“It’s just managing those increases and managing the expectations of clients around those increases,” the CEO told Insurance Business. “Already it is a stretched economic environment after COVID; many businesses are struggling. Inflation has increased over the past few years to the 7.2% at present.


“Insurance premiums have increased on motor with an average of 10% and on home and contents with an average of 17% over the last year. Further increases are inevitable… Howden is here to help and assist our clients in navigating what is going to be an interesting year.”


And if to further remind New Zealand about the devastating that natural disasters can have on the country, last night an earthquake rocked the centre of the country. The quake was considered strong, with its epicentre about 50 kilometre off the coast of Paraparaumu in the Kapiti Coast.


The prime minister told media that his reaction to earthquake was "unprintable". He quipped that he looked out the window expecting to see a plague of locusts next.


 

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