For New Zealand’s North Island, the first few months of 2023 were brutal. The floods around Auckland followed by Cyclone Gabrielle cost the economy nearly half a billion dollars and led to a similar number of insurance claims as the Canterbury earthquakes.
The impact on insurance companies has been immense with premiums predicted to spiral upwards putting more pressure on SMEs already grappling with rising interest rates, inflation and depleted capital.
“The cost of weather-related claims and the effects of high inflation and disrupted supply chains have been impacting New Zealand’s insurers for two years,” David Rayner, head of key partnerships at Crombie Lockwood, says, “but the Auckland Anniversary Flood and Cyclone Gabrielle mean that insurers are likely to move from an environment of gradual premium increases to demanding more drastic rises.”
Rayner warns that New Zealand is entering its hardest market in over a decade and accountants will be critical to struggling firms.
He has identified four steps they can take to ease their clients’ pain.
1. Building strong relationships.
“Nurturing the relationship between brokers and insurers becomes very important during times like this,” says Rayner. “You’ll most likely be your client’s most trusted advisor, so they’ll listen to what you’ve got to say. “Accountants need to work closely with brokers to ensure insured risks are being presented in the best possible way.”
“Nurturing the relationship between brokers and insurers becomes very important during times like this… You’ll most likely be your client’s most trusted advisor, so they’ll listen to what you’ve got to say.”
A key part of that process is ensuring the broker fully understands the business so a fit-for-purpose insurance and risk program can be configured. Numerous global factors can drive up premiums for SMEs, putting pressure on budgets and making accountants and brokers even more critical to clients. How to navigate a hard insurance market
2. Starting renewals early
“The more time a broker has to work on renewing a policy, the more likely there’ll be a good result,” he says. That means putting in some hard yards to gather the relevant information well before official renewal discussions begin. Building in a longer lead time enables a broker to negotiate with potential insurers to get the right coverage and the best possible deal.
3. Get the details right
Rayner advises businesses to expect their insurer to request a sizeable volume of information – more than they would in a softer market. “In the current climate, they’re going to require a great deal of underwriting detail, so it’s essential to collate accurate and up-to-date building valuations, risk surveys, and risk control processes. A broker can then present your needs in the best possible light to make it an attractive proposition to an insurer.”
4. Avoid knee-jerking
A common reaction to escalating premiums is reducing cover to help the stressed out cashflow situation, but it can be a false economy with serious repercussions. “What the recent weather events have shown is that the unexpected can and does happen. Downsizing the amount insured means you’ve decided to carry some of the risk that your insurer would otherwise accept. “Unless you can afford for the worst to happen, I really wouldn’t recommend it. Deciding to switch insurers or brokers during tough times is also inadvisable and may limit future options for your clients.”
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Crombie Lockwood is one of New Zealand’s leading insurance broking companies with over 100,000 clients. For information on how they can help navigate the hard insurance market for your business, visit crombielockwood.co.nz