Warning of a sharp lift in insurance premiums

A Gisborne insurance expert is warning home owners and business owners to expect steep rises in insurance premiums over the next 12 to 24 months.

Emerre and Hathaway Insurance Brokers partner Ray Brott said a complex combination of reasons was behind the biggest rises he had seen in 40 years.

“There are two government levies that are included in your insurance premium and contribute heavily to future increases,” Mr Brott said.

“The NZ Fire Service require increased funding to cover their rising costs. This has led to an increase in the fire service levy.

“EQC funds have been exhausted due to the multiple natural disaster events over the past six years. This has led to an increase in the EQC levy in order to replenish this fund.

“In addition to this, there are increased reinsurance costs due to the numerous disasters both in New Zealand and around the globe with events such as hurricanes, severe storms, flooding and earthquakes.

“We also have new risks that insurers now cover. An example of this is in respect to rental properties with the emergence of methamphetamine clean-up costs.

“Motor vehicle insurance is not immune to premium increases either. The costs to repair a vehicle are increasing in no part due to the technology that is now incorporated into a modern vehicle.”

Increase in premiums

The changes mean an average owner-occupied home could expect an increase of between $350 and $500 to insurance premiums from November 2017.

This increase is made up of a 40 percent hike in the fire service levy to $127 plus GST a year on house and contents insurance, a 33 percent lift in the maximum EQC levy to $276 incl GST, and an earthquake premium increase of about 15 percent for the Gisborne region (this is what the insurance company charges for earthquake cover over and above what EQC covers), as well as a general premium increase of about 15 percent (due to increased costs from national and global events, and increased reinsurance costs).

Rental properties would also see additional changes, on top of those affecting owner-occupied homes.

“In addition to these, all insurance policies now automatically include an allowance for methamphetamine clean-up costs to varying levels. The additional premium insurers are charging for this extra cover is in the region of $200 incl GST per year. These additional charges will no doubt be passed on to tenants via increased rents.”

Motor vehicle insurance will also rise.

“Due to an increase in repair costs, you can expect an increase of 10 percent to 15 percent to the standard motor vehicle premium.

“By way of example, windscreens increasingly have a variety of heat, light, moisture and connectivity sensors fused or moulded into the glass. These now cost between $2000-$8000 for original glass replacements.”

Commercial and rural policies are also affected by the earthquake premium increase, general premium increase and the 40 percent rise in the fire service levy.

“As an example, for a sum insured of $200,000 there would be a fire service levy increase of $69 incl GST.”

He pointed out that it was the government’s intention to increase the fire service levy further in 2018.

Commercial and rural vehicles, like private vehicles, could also expect an increase in premiums of 10 to 15 percent.

Mr Brott recommended that people contact their insurer or insurance broker regularly to ensure they retained a “comprehensive yet competitive” cover.

A Gisborne insurance expert is warning home owners and business owners to expect steep rises in insurance premiums over the next 12 to 24 months.

Emerre and Hathaway Insurance Brokers partner Ray Brott said a complex combination of reasons was behind the biggest rises he had seen in 40 years.

“There are two government levies that are included in your insurance premium and contribute heavily to future increases,” Mr Brott said.

“The NZ Fire Service require increased funding to cover their rising costs. This has led to an increase in the fire service levy.

“EQC funds have been exhausted due to the multiple natural disaster events over the past six years. This has led to an increase in the EQC levy in order to replenish this fund.

“In addition to this, there are increased reinsurance costs due to the numerous disasters both in New Zealand and around the globe with events such as hurricanes, severe storms, flooding and earthquakes.

“We also have new risks that insurers now cover. An example of this is in respect to rental properties with the emergence of methamphetamine clean-up costs.

“Motor vehicle insurance is not immune to premium increases either. The costs to repair a vehicle are increasing in no part due to the technology that is now incorporated into a modern vehicle.”

Increase in premiums

The changes mean an average owner-occupied home could expect an increase of between $350 and $500 to insurance premiums from November 2017.

This increase is made up of a 40 percent hike in the fire service levy to $127 plus GST a year on house and contents insurance, a 33 percent lift in the maximum EQC levy to $276 incl GST, and an earthquake premium increase of about 15 percent for the Gisborne region (this is what the insurance company charges for earthquake cover over and above what EQC covers), as well as a general premium increase of about 15 percent (due to increased costs from national and global events, and increased reinsurance costs).

Rental properties would also see additional changes, on top of those affecting owner-occupied homes.

“In addition to these, all insurance policies now automatically include an allowance for methamphetamine clean-up costs to varying levels. The additional premium insurers are charging for this extra cover is in the region of $200 incl GST per year. These additional charges will no doubt be passed on to tenants via increased rents.”

Motor vehicle insurance will also rise.

“Due to an increase in repair costs, you can expect an increase of 10 percent to 15 percent to the standard motor vehicle premium.

“By way of example, windscreens increasingly have a variety of heat, light, moisture and connectivity sensors fused or moulded into the glass. These now cost between $2000-$8000 for original glass replacements.”

Commercial and rural policies are also affected by the earthquake premium increase, general premium increase and the 40 percent rise in the fire service levy.

“As an example, for a sum insured of $200,000 there would be a fire service levy increase of $69 incl GST.”

He pointed out that it was the government’s intention to increase the fire service levy further in 2018.

Commercial and rural vehicles, like private vehicles, could also expect an increase in premiums of 10 to 15 percent.

Mr Brott recommended that people contact their insurer or insurance broker regularly to ensure they retained a “comprehensive yet competitive” cover.

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