Reports that bad weather conditions and rising building costs are going to impact the profits of NZ insurers are spot on, according to the Insurance Council of New Zealand (ICNZ).

CEO Chris Ryan says recent industry predictions that insurers will only experience moderate profit growth “reflects the feeling of quite a few players in the market”.

Significant floods that saw claims “in the order of around $NZ400 million in the past four to five years” increased pressure on the market domestically and internationally, and issues arising from the Building Act have all had a “big effect” on industry profits. Mr Ryan says these factors mean rates aren’t likely to soften much, either.

Mr Ryan says underinsurance remains a key issue in NZ, with major floods hitting provincial areas where there are high levels of underinsurance or non-insurance.

“It increases the liability carried by the Government and in our view discriminates against the insured because you’ve got to have a certain level of insurance in a community to make sure it can rebuild itself properly.”

He says while the industry is being very careful to say premiums won’t rise because of flooding, they are not likely to decrease either. 

“If you look at the market, and all the various factors, it doesn’t look like these rates will drop much at all.”