Latest / Best of Business / Jenee Tibshraeny: NZ Herald Wellington business editor on the Government's planned review into insurance premiums

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Jenee Tibshraeny: NZ Herald Wellington business editor on the Government's planned review into insurance premiums · Best of Business

• 0:09
  Speaker 1: You're listening to a podcast from News Talks be follow
• 0:12
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• 0:17
  Speaker 1: Heather Doo for si Ala.
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  Speaker 2: The government's announced it's looking into why your insurance premiums
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  Speaker 2: are so high.
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  Speaker 1: Now.
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  Speaker 2: The Herald, Wellington Business editor Jen aib Trainee says the
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  Speaker 2: exercise is worthy, but probably are not going to change
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  Speaker 2: a lot for you if you have home insurance and
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  Speaker 2: Jine's with us now, Jenay, Hello, Hi Heather, Now why
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  Speaker 2: do you think this?
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  Speaker 3: Well, firstly, I believe that this government at least is
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  Speaker 3: not interested in interfering with the market. The market is
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  Speaker 3: actually conveniently helping the government by making it too expensive
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  Speaker 3: for you to get insurance and risky paces. I mean
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  Speaker 3: this has been happening, you know, for some time in
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  Speaker 3: Wellington due to earthquake risk, and we're seeing it increasingly
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  Speaker 3: with flood risk. It's actually convenient for the government if
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  Speaker 3: the insurance becomes too expensive and people move to safe places.
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  Speaker 3: I think the government's kind of aware that if it
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  Speaker 3: sort of tries to soften the blow of the risk
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  Speaker 3: based pricing the insurers do, it could create moral hazards.
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  Speaker 3: So it could make you think, well, I may as
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  Speaker 3: well just move somewhere risky because the government will bail
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  Speaker 3: me out anyway, you know, and that's not particularly helpful.
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  Speaker 3: So I think that's one fact. Also, back in twenty
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  Speaker 3: twenty four, I talked to Nikola Willis about why she
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  Speaker 3: had got the Treasury to stop looking at how the
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  Speaker 3: government could respond to risk based pricing. Treasury was doing
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  Speaker 3: some policy work at the time she wanted it stopped,
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  Speaker 3: and she said, look, she wasn't going to intervene in
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  Speaker 3: the market, That's what she said back in twenty twenty four,
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  Speaker 3: and that, you know, the government was better placed looking
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  Speaker 3: at climate adaptation, you know, issues around consenting that type
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  Speaker 3: of thing. So basically, I genuinely don't think the government
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  Speaker 3: is interested in intervening in the market.
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  Speaker 2: Okay, that is fair enough, and they not assist, I mean,
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  Speaker 2: regardless of whether they want to intervene or not. And
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  Speaker 2: I think they are doing the right thing. It is
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  Speaker 2: becoming unaffordable for some people, and you could argue people
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  Speaker 2: who are actually not at that much risk because of
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  Speaker 2: the way the thing is priced. Could they not change
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  Speaker 2: things about the capital requirements for insurance companies to make
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  Speaker 2: it a bit cheaper.
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  Speaker 3: Yeah, you know, so, I mean, this is the thing
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  Speaker 3: with this whole topic. I agree entirely that it is,
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  Speaker 3: you know, rough, and it's unfair. And if you know,
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  Speaker 3: you've bought a piece of land and you plan to
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  Speaker 3: build on it and that's your retirement plan and you've
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  Speaker 3: never seen it flood, and then suddenly the government comes
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  Speaker 3: in and says you can't build on it now because
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  Speaker 3: of climate change, you know, you're not going to be
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  Speaker 3: particularly happy. So of course, you know, it's a tough issue.
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  Speaker 3: That the issue, Yeah, the area that I think the
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  Speaker 3: government might move on is the amount of capital that
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  Speaker 3: it requires, all that the Reserve Bank requires insurers to hold.
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  Speaker 3: So people will recall that recently the Reserve Bank said
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  Speaker 3: it would allow banks to hold less capital or less
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  Speaker 3: costly capital, because the bank said that the cost of
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  Speaker 3: holding all this capital to make them strong was too
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  Speaker 3: high and if they could hold a bit less, they
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  Speaker 3: might lend more freely and interest rates on borrowing might
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  Speaker 3: be a bit lower. Now, the insurance industry makes kind
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  Speaker 3: of a similar argument. You know, it's been saying that
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  Speaker 3: the Reserve Bank's been too tough, being too mean, you know,
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  Speaker 3: made them be way stronger than they need to be
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  Speaker 3: and maybe if they could hold less capital, then the
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  Speaker 3: insurance premiums could come down. So that's something the industry
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  Speaker 3: has been pushing for the government is cognizant of that,
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  Speaker 3: but again I'm sort of skeptical. For me and you know,
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  Speaker 3: normal people with insurance, I'm not sure if that will
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  Speaker 3: translate to much lower premiums.
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  Speaker 1: You know.
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  Speaker 3: One other area here is that the government could do
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  Speaker 3: more by expanding what the National Hazards Commission covers. That's
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  Speaker 3: like the EQUC, it's knuckled the Natural Hazards Commission. You know,
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  Speaker 3: if that covered blood, you know, that could do a
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  Speaker 3: bit more having a state insurer pick up more of
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  Speaker 3: the low But the moral has but again som has
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  Speaker 3: it thinking exactly, I don't think that's something the government
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  Speaker 3: wants to do. So, you know, the insurance industry says
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  Speaker 3: that the problem is not the insurance, but the problem
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  Speaker 3: is the risk and you have to manage the risk.
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  Speaker 3: And to me that that makes sense, but it's just
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  Speaker 3: it's just really hard.
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  Speaker 2: Okay, I mean, do you so having said that, because
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  Speaker 2: I mean I think we all understand sure if you
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  Speaker 2: if you've built a house in a place that's going
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  Speaker 2: to get flooded every year, you probably shouldn't have insurance
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  Speaker 2: or you should pay a lot for it. But when
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  Speaker 2: you look at it, it is not that nuanced by
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  Speaker 2: these these insurance companies. It's a second tire postcode. So
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  Speaker 2: is it possible that this review may actually sure not
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  Speaker 2: lead to lower insurance premiums for us, but it may
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  Speaker 2: at least answer some questions for us as to how
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  Speaker 2: these guys are doing it, because I feel like the
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  Speaker 2: charity is what we want here.
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  Speaker 3: Yeah, look, I mean I really I hope it does.
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  Speaker 3: It's six months long, and the government's got representatives from
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  Speaker 3: the coss you know, reserve, if you may be a
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  Speaker 3: whole bunch of them to do it. The challenge will be, gosh,
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  Speaker 3: I sound so negative on this issue, but the challenge
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  Speaker 3: will be a lot of this information is commercially sensitive.
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  Speaker 3: So I'm an insurance company. I pay a lot of
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  Speaker 3: money for a modeling company that looks at specific you know,
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  Speaker 3: address level, slip risk, flood risk, all the rest of it.
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  Speaker 3: And that's how I do my fancy maths, and that's
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  Speaker 3: how I decide that my premium is this and my
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  Speaker 3: neighbour's premium is something completely different. So I strongly doubt
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  Speaker 3: that the insurers will release the sort of granular information
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  Speaker 3: that would give us a really good insight because of
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  Speaker 3: commercial sensitivity, and I'm not sure if the government will
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  Speaker 3: be able to compel them to do that. But I
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  Speaker 3: think broader stuff like information around what the reinsurance market
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  Speaker 3: is doing. You know, that's the market that backs up
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  Speaker 3: the insurers. They are the ones that really influence pricing heavily.
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  Speaker 3: I think getting a bit more insight into that market
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  Speaker 3: would be useful, maybe that the building costs that it's
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  Speaker 3: another thing again, complex market and I just don't see
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  Speaker 3: a quick, easy fix. And it's also a global issue.
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  Speaker 3: You know, New Zealand's is not the only country country battling.
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  Speaker 2: Context that I think is important. Jane, thank you very much,
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  Speaker 2: as always, appreciate your explanation. Janee to b Traani, the
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  Speaker 2: Heralds Wellington Business.
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