Rising inflation, along with regulatory pressures, are among the key challenges facing insurance brokers in New Zealand, according to the country’s peak body representing the profession.

The Insurance Brokers Association of New Zealand (IBANZ) says another focus area relates to the Government’s decision to retain the insurance levy regime to fund fire and emergency services following a review.

And last December the Department of Internal Affairs proposed two key changes to the levy regime that will fund Fire and Emergency New Zealand from July 1 2024.

The first will see the fire and emergency levy charged on insurance policies for fire damage instead of policies for any material damage and the second will see the levy calculated on the “sum insured” rather than the “amount insured” in a contract.

Public consultation on a draft Bill making these amendments will be undertaken early this year and further public consultation will then take place before any change to the levy amount is made.

“We are incredibly disappointed that the outcome of that [fire and emergency funding] review is that it remains with insurance,” IBANZ CEO Melanie Gorham told insuranceNEWS.com.au.

“At the moment we are continuing to engage quite actively with both Fire and Emergency New Zealand and the Department of Internal Affairs.

“We’re very much trying to focus on efficiency and simplification. There’s lots of rules around how it applies, what it applies to, which means people can make mistakes more easily which leads to fines which is not a great outcome.”

Ms Gorham has been IBANZ CEO since March 2020, taking over from Gary Young, who retired after 14 years in the role.

Much has taken place during her tenure so far, including the pandemic which broke out just as she started. On top of having to manage the covid impact, other matters on Ms Gorham’s agenda relate to inflation concerns, regulatory changes and plans to double the Earthquake Commission (EQC) cap for residential building cover to $NZ300,000 ($279,106) from October.

On inflation, she says it’s a challenge for everyone. Latest data shows New Zealand’s annual inflation rate soared to 5.9% last year, its highest since 1990.

“Nothing seems to be getting cheaper at the moment but people’s need for insurance and the staples remains,” Ms Gorham said.

She is concerned too about the increased EQC residential cap and what it will mean for consumers living in less risky regions.

“It’s a mixed bag,” Ms Gorham said, pointing out the changes “will likely deliver savings for some of the perceived higher risk areas” but for those who are in lower risk natural disaster areas, they are going to be probably paying more.

Ms Gorham says she is also concerned about what the Financial Markets (Conduct of Institutions) Amendment Bill may mean for brokers. The Bill is now awaiting its second reading in parliament.

There may be a “doubling up” with changes that took effect in March last year under the Financial Services Legislation Amendment Act (FSLAA) 2019.

“We understand the need for [regulations] but at some point you over-regulate and it may drive outcomes that aren’t desirable for people you’re looking to protect,” Ms Gorham said.