Cost of Weather Insurance Claims up 70% – New Data

Kiwi SME’s need to do more to prepare for adverse weather events with new industry figures showing the cost of insurance claims has increased by 70% in the past three years alone.

Jo Mason CEO of NZbrokers, one of the country’s largest insurance brokerage groups says new insurance claim data shows the number of storm and flood insurance claims has increased by 56% over the last three years and this was accompanied by a significant spike in the cost of claims.

“There are a number of variables which may impact the size of weather related insurance claims – including rising construction costs and inflation.

“At the same time the cost of electronic components inside machinery mean, what used to be a repairable mechanical device cannot be salvaged once it becomes wet and the manufacturer’s warranty is voided – with the only option remaining to completely replace the equipment,” she says.

Mason says the international Global Facility for Disaster Reduction and Recovery (partly funded by the World Bank) which evaluates the threat of natural disasters in countries around the world, has now ranked New Zealand at a ‘high hazard’ level for most flooding and cyclone events.

“Area specific data is used by reinsurers to calculate the risk profile of parts of New Zealand which determines the cost of insurance premiums.

“While we were already rated as a high risk for seismic activity, now storm and flood losses in our market are on their radar as well.

“At the same time, data from the World Meteorological Organisation (WMO) is projecting the number of weather disasters will continue until the 2060’s.

“Of particular concern for New Zealand, is the fact ocean temperatures are among the warmest on record and global sea levels are continuing to rise, so far by 26cm.

“Despite evidence which says emissions are now levelling out, the concentrations of CO2 will remain in the atmosphere and have increased at a record pace over the last year.

“Due to the inertia of the climate system, scientists expect to see the number of weather related disasters to continue for the next four decades,” she says.

Mason says while there may be some debate over the impact of climate change on our inclement weather patterns, businesses need to ensure they are prepared for these types of adverse events.

“The data showing the rapidly rising costs of claims should be sufficiently persuasive for companies to review not only their current level of insurance cover but also how they will maintain their business continuity,”

Mason says according to industry figures for the last 18 months, insurers have paid more than $265m for 15 serious weather events in New Zealand, the largest being for ex-cyclone Debbie, particularly in Edgecumbe, $91.4m.

Mason says the figures show that there is no particular region affected more than others.

“Weather events may cost less than a serious seismic event but the increasing frequency and geographic spread of events show every business in New Zealand should be prepared,” she says.

Mason says new research has shown that insurance alone may not prevent a business from failing in the event of a disaster.

“A recent study of the longer term impact of the Christchurch earthquakes on local businesses found that they were unable to recover when they ceased trading for months even though there was no physical damage to their business,” she says.

Mason says research shows that businesses which have planned to handle a disaster event will significantly improve their chances of a successful recovery.

“The impact on small businesses can be significant with US data showing nearly a quarter of SME’s close after a heavy storm.

“Unfortunately preparing a business continuity or resilience plan is often not given the priority it deserves and the majority of SME’s have no disaster recovery plan in place,” she says.

Mason says the quieter Christmas holiday period can be a good time for business owners to reflect on their business resilience plans.

“A business continuity plan will enable your business to respond to an emergency and continue to operate as normally as possible, working to minimise the interruption and cause the least possible inconvenience to staff, customers and visitors.

“There are a number of online tools to build your own plan and an insurance broker can help coordinate your insurance programme to your business needs.

“Sharing the extent of your preparedness with the insurer may demonstrate your business in a positive way, increasing the number of insurers that want to compete for your business and help reduce the premium,” she says.

Property Insurance Costs Tipped to Rise

The cost of insuring some buildings could rise by more than 50 percent in just three months according to new figures from insurance brokers.

David Crick managing director of Runacres Insurance says the cost increase is likely to be disproportionately larger for lower value dwellings.

“Immediately following the Christchurch earthquakes in 2010 and 2011, we saw insurance costs jump by up to five times higher than the year prior. However, over the past 12-18 months we have seen a sustained drop in the cost to insure as insurers looked to grow their client base and new competitors entered the market.

“We expect that trend to change in 2017 and 2018 with the impact of increased taxes on insurance and the influence of other market forces coming through such as the Kaikoura earthquakes and limited supply of cover from some insurers,” says Crick.

Jo Mason CEO of NZbrokers, the country’s largest insurance brokerage collective says competitive changes in the market, the rising cost of cover for methamphetamine damage in tenanted buildings, as well as increases in EQC and the Fire Service Levies will see the cost to insure some properties increase by up to 56 percent according to her organisation’s analysis.

“If we take the example of a 1970’s farm house occupied by a farm worker with a replacement value of $230,000 which cost $944 to insure eight months ago, this will rise to $1478 in November – an increase of 56%,”

“While the fire service and EQC are essential factors in managing the risk of home ownership, it’s a real concern to see that this increase is going to hit many of those in lower value housing disproportionately higher,” says Mason.
She says while the sharp increase in the cost to insure a building may be off-putting to some, the cost of not being adequately insured could be far higher.

“All too often we have seen disaster strike, with devastating consequences for those who are under-insured or not insured at all. My advice to commercial property owners and homeowners is to talk to their broker about making sure you have the right level of cover with the right sums insured,” she says.

Rising Building Costs Leaving 85% of NZ Homeowners Underinsured

Rapidly rising building costs and changes to policy wording mean Kiwi homeowners are uninsured by an average of 28 percent – according to an industry expert.

Jo Mason CEO of NZbrokers, New Zealand’s largest insurance broking collective, says a spate of recent natural disasters has highlighted the need for homeowners to contact their broker and check what amount their home is covered for carefully.

“In the past six months we have had several devastating flood, fire, seismic and adverse weather incidents around the country.

“It is crucial that homeowners are aware of what it would cost to rebuild their house from scratch and review this regularly,” she says.

Mason says that changes to sum insured insurance policies could leave homeowners under-insured.

“Sum insured policies limit the maximum amount your insurer will pay in the event your home is totally destroyed.

“In an environment where building costs are rising at around 7-17 percent each year, there is no guarantee that the amount you are insured for will be enough to cover the cost of a total rebuild.

“What this means is that a house which cost $500,000 to construct just two years ago could be up to $185,000 more to rebuild today. Effectively the risk of the rebuild cost being greater than the insured value is borne entirely by the policyholder,” she says.

Mason says a recent Treasury report estimates that up to 85 percent of homes could be underinsured by an average of 28 percent.

She says as building prices across the country have risen by up to 17 percent, there is an urgent need for homeowners to check they are insured for the full replacement cost of their house, not just for a portion of it.

Mason says the cost of building materials, architectural features, council consents and a variation in the quality of workmanship mean the expense of a rebuild can vary significantly over time and across regions.

“My advice to homeowners is don’t take unnecessary risks, consult with an insurance broker in your area who can assess your needs and is able to advise what type of cover is best suited.”

NZ acquisition for broker network AUB Group

BrokerWeb Risk Services (BWRS) in combination with its acquisition partner AUB Group NZ (AUB NZ) has acquired a 50% shareholding in Bay of Plenty insurance broker Dawson Insurance Brokers (Rotorua) Ltd.

The company said the move had been secured by acquiring ‘a large portion’ of managing director Rob Harvey’s shareholding, as part of his plan to reduce shareholding and transfer his MD role to Denis Marriner.

“I have been planning my succession as both MD and principal shareholder for a couple of years and now is the perfect time for Denis to take the leadership role, supported by myself and our new partner,” said Harvey.

Harvey would continue to be ‘very active’ in the business as a broker, shareholder and director, the company said, adding that all shareholders were excited to have BWRS and AUB NZ become a shareholder and support the growth and development of the business into the future.

Marriner will be joined by current directors, D-Anne Wilson, Peter Mahar and Rob Harvey as continuing board members.

“I’m excited to take on the role of managing director with the support of Rob and the team,” Marriner said. “We are also looking forward to providing our clients with continued personal service, now backed by the greater BWRS and AUB Group Ltd.”

BWRS managing director David Archer explained why Dawson’s would be a great member of the wider AUB family.

“They are an example of a really strong, client focussed insurance broker and we look forward to supporting their growth into the future under our partnership model, which we have adopted from the greater AUB Group,” Archer said.

Dawson Insurance Brokers was established over 35 years ago in the Bay of Plenty and has grown to represent almost 4,000 clients, and in excess of $15 million of GWP, the company said.

Read more here.

Insurance Business NZ: AUB Group boss on 2015 highlights and challenges for 2016

AUB Group managing director Mark Searles tells IBNZ his 2015 highlights and what challenges he expects the company – and the industry – will face this year.

What have been the highlights of 2015 for you?
We’ve just achieved our 10th consecutive year of underlying profit growth since listing, which, given the recent state of the market, goes to show that our commitment to our sustainable growth strategy, and our disciplined approach (especially in respect to our owner-driver partnership model) is paying off.

Bringing together so many members of our extended AUB Group (formerly Austbrokers Holdings) ‘family’ both present and past with our industry friends and colleagues to mark our 30th anniversary was also a huge stand out. In New Zealand especially, one of our highlights was the coming together of BrokerWeb Management and Brokernet to form NZbrokers, the 3rd largest broking group in NZ. It’s been exciting to see the 55 broking partners combine their size and strength around a common vision and purpose. Partnership and collaboration are at the core of who we are and this has been supported by our broking and insurer partners, for the ultimate benefit of clients.

What do you hope 2016 will bring for AUB Group, especially NZbrokers?
Growth! It’s an exciting time for AUB Group and particularly for our NZbrokers network, and I hope to see plenty of organic growth and growth through the addition of new members to the NZbrokers family.  We look forward to further enhancing NZbrokers’ purpose of adding value to our partners’ businesses, and new initiatives to support partners and their clients.

What do you think will be the biggest challenges on an industry-wide level?
I’ve had a number of questions over the past year asking about the future of broking in an increasingly ‘direct’ world and the idea that broking will become increasingly marginalised in the SME space. I continue to argue that that’s rubbish.

This is a relationship industry and as long as our broker partners remain relevant to their clients they have a key role to play. Our partners have built up their clients’ trust over a number of years to be recognised as a trusted advisor to their business – enough to justify keeping their broker over going direct and saving a few dollars.

As I mentioned before it’s part of our role to be across issues that could impact our partners and clients and ensure clients have got the right solutions in place to protect the future of their business ensuring relevant solutions to meet their risk needs.

But of course it’s easier said than done! Making sure we can service ALL clients’ risk needs means understanding what’s happening in the regulatory, physical and now even the digital environment. This is where we, as a group, can really make a difference in supporting our partners.

What would you say are the burning issues/challenges you will have to tackle as a company?
The biggest challenge; or opportunity in our view, and one that we’re arguably helping to lead – is to provide our partners and clients with a ‘whole-of-risk’ approach. We started focussing on this journey two years ago not only to mitigate the effects of the insurance cycle but importantly as a key step to confirm our position as Australasia’s leading insurance and risk management specialist.

We’re able to leverage the power of our partnerships to respond to changes in legislation, environmental impacts, information and technology to ensure we’re well positioned to continue to provide the kinds of services clients need. If we’re always keeping clients at the centre of everything we do, giving due consideration to their full risk portfolio (people, physical and financial risks) and providing relevant solutions, the opportunity to help grow and protect their business will also help grow ours.

What recent innovations have made the most impact on AUB Group, either internal ones or external, and are there any internal ones in the pipeline that you can discuss? Leveraging our unique owner-driver partner model in areas outside of our traditional insurance broking heritage (so now extending to specialist underwriting agencies and risk services) marks an innovative and important shift that will provide us with sustainable growth and a competitive advantage into the future.

We also have a number of innovative initiatives across our business areas, such as electronic enablement of specialist underwriting systems.

See full article from Insurance Business New Zealand: 

NZbrokers one of Insurance Business NZ’s top stories of 2015

7th most read Insurance Business NZ article in 2015 – not bad! See below for an excerpt from IBNZ’s article ‘2015 top story shocker’ regarding our initial partnership announcement.

“The brokers were making waves too however. When BrokerWeb Management, NZbrokers Holdings and Brokernet NZ announced their new partnership it put them in the 7th most read position.”

Click here to read the full article.

Group’s owner acquires one of NZ’s largest brokers

AUB Group (owners of NZbrokers) has acquired one of New Zealand’s largest brokers – the current Insurance Broker of the Year, Runacres and Associates – from IAG. The group has arranged the deal through its 80% owned entity AUB Group NZ Ltd, making the announcement this morning.

AUB Group CEO and managing director, Mark Searles, who is also chairman of AUB Group NZ, said the move was further evidence of the targeted expansion strategy AUB Group had for New Zealand.

“Runacres is a high performing broking business with a strong track record of sustainable growth over the past five years,” Searles said. Representing almost NZ$50 million GWP, 5,300 clients and with 30 staff across Christchurch, Auckland and Greymouth, Runacres is one of the largest brokers in New Zealand with a portfolio spanning corporate, commercial and personal clients.

Along with AUB Group’s existing equity interests, the group now directly represents NZ$200 million in GWP in New Zealand. On top of that it owns NZbrokers, which manages the largest cluster group of brokers in New Zealand. In total, either directly or through its partners, the group now represents NZ$550 million of GWP and is the third largest broking entity in the New Zealand market, the company said.

Keith McIvor, managing director of AUB Group NZ, told Insurance Business that not only was it great for the New Zealand market, it was great for Runacres too. “It puts the ownership of Runacres with a broking company ownership structure which you would hope can present it with more scale and more opportunity to grow. “I think it’s great for the people of Runacres because they are able to continue, under David Crick’s leadership, with their culture and their way to support their clients and grow the business.” McIvor confirmed that there would be no changes to the business at all.

“I would like to call this an ‘and’ strategy. We love this business and we think everyone within it has done an exceptional job. We would just like to support those people in the business and David Crick in his leadership role to continue to grow.” He added that there was likely to be more acquisitions to the Group in the future. “We still have a very healthy appetite for quality broking businesses to join us through our equity partners,” he said.

David Crick said he was ‘elated’ to be further strengthening their relationship with AUB Group NZ. “I am confident that this partnership will provide my team with an effective platform for continued growth,” he said.

Runacres & Associates Ltd wins Small/Medium Broker of the Year Award

NZbrokers is delighted to congratulate its member, Runacres & Associates Ltd, for winning the title of Small/Medium Broker of the Year at the New Zealand Insurance Industry Awards at the SKYCITY Convention Centre in Auckland last night.

The event, hosted by the Australian and New Zealand Institute of Insurance and Finance (ANZIIF), was a celebration honouring the achievements and professionalism of companies and individuals within the New Zealand insurance market over the last year. The Small/Medium Broker of the Year award was for insurance broking businesses in New Zealand handling up to $50 million of premium and who have demonstrated strong performance and outstanding service for their customers.

Founded in 1981 by Anthony Runacres, Runacres & Associates have become recognised for being totally client-focussed and experts in delivering business-to-business insurance services and bespoke insurance solutions to the commercial sector.

Managing Director Jim Harris noted that Runacres has truly delivered superior levels of customer service, relationship management, innovation and communication supported by strong retention and growth records, as well as sound financial management of the business.

“Having now been under the leadership of Managing Director David Crick for the last six years, Runacres & Associates has grown to include an Auckland, Christchurch and West Coast Division and gone from strength to strength, which clearly demonstrates what we mean by our NZbrokers vision to be New Zealand’s most trusted insurance and risk solutions network and challenger brand.

“On behalf of NZbrokers, our sincere congratulations to David and the whole team at Runacres & Associates on securing this prestigious award, which is a significant achievement – well done to you all!” said Mr Harris.

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Hawke’s Bay merger to double BWRS’ Napier operations

Hawke’s Bay Insurances Ltd (HBi) has merged with BrokerWeb Risk Services Ltd (BWRS) which will take effect from 1 November 2015.

“This is being achieved by way of BWRS acquiring the Goodwill and associated assets of HBi,” HBi’s Bill Reilly and BWRS’ David Archer said in a joint statement yesterday.

“The coming together of these two businesses will produce an enhanced Hawkes Bay broking business of size that Bill and David know will ensure the high standards of client service aspired to by both companies will be best sustained into the future in an increasingly complex insurance market,” the statement continued.

The two operations will continue as separate divisions of BWRS in their own premises for a period of time, and all staff members are to be retained in the combined operations, the statement said.

The Napier operation of BWRS will continue to be run by incumbent BWRS Hawkes Bay regional manager Bruce Lewis and Bill Reilly will continue in charge of the HBi business.

BWRS chief operating officer Alan Black will be overseeing the coming together of the two businesses.

“For all of us  involved it will be ‘business as usual’ and, certainly for our insurance company partners we are intent on these moves creating an even stronger bond with those insurers who have assisted us over the years,” Reilly and Archer said.

Austbrokers Holdings is a 50% equity partner of BWRS and CEO Mark Searles said he was pleased with the latest development.

“It’s great to see the momentum of growth is continuing after our recent expansion into New Zealand,” he told Insurance Business.

“David Archer (CEO of BrokerWeb Risk Services Limited) has done an outstanding job of working with HBi’s Managing Director Bill Reilly to bring together two businesses with a strong client focus – they will be a good cultural fit.”

He added: “This acquisition is another step towards NZbrokers’ vision of combining its strong New Zealand heritage, local expertise, national footprint and global reach to be New Zealand’s most trusted insurance and risk solutions network.”


Five Minutes With…Jim Harris, NZbrokers

Jim Harris NZbrokers

Why did you get into insurance?
My father was manager of NIMU in Pukekohe and Rotorua so I had a taste for it growing up, having followed him around panel-beater shops for many years as a school boy.

How would you sum up insurance brokers in three words?
Delivering financial security.

What’s the strangest thing you’ve ever arranged cover for?
I can’t comment on the strangest, but the most interesting was insuring Air New Zealand back in the early 80s, and particularly providing “testing cover” on jet engines.

How would you change the industry?
I would ban underwriters and brokers from trying to compete on IT systems platforms and utilise the 100’s of millions of dollars currently expended/wasted  by individual companies on developing a “common” and “standard” industry wide IT systems platform which delivers full connectivity across all lines of business and totally streamlines the way we transact business. The significant savings could then be directed towards attracting, training and rewarding experienced, knowledgeable and high performing insurance professionals.

What’s the most important thing a broker can do to develop their business?
Be totally customer driven and focussed – always!!!

What’s the best advice you’ve ever been given?
Always be true to yourself and your values.

If you were Prime Minister for one day, what would you do?
I would reinstate and support the “family unit” as the centre of all things good in society.

What has been the highlight of your career?
I’ve had the pleasure and privilege of building Intermediary Insurance Services, MMI, Allianz and now BrokerWeb/NZbrokers, but the greatest highlight is having the pleasure and privilege to work with so many wonderful people, who have become close and lifelong friends.

What’s your favoured style of coffee?
Having always had a coffee on my desk during my early years in the industry, I now can’t drink it at all, so now enjoy a trim hot chocolate – with marshmallows of course, unless my grandchildren are around.

Union, league, soccer or other?
Having played the game for over 25 years it’s union, union, union, but also football, as both my sons played, followed now by my grandson and one of my granddaughters.

If you could invite three people to dinner, dead or alive, and excluding family and friends, who would they be and why?
Billy Connolly for his wonderful sense of humour and his travel stories;
Bruce McLaren for his motor racing driving and car manufacture prowess;
Richie McCaw as our greatest All Black captain and player.

Complete this sentence: If I wasn’t in insurance, I would be…
Retired, as having thoroughly enjoyed over 47 fantastic and stimulating years in the insurance industry, I can’t imagine doing anything else.

Original article published by Insurance Business New Zealand: