Cost of insurance ‘could rise 25 per cent’

Press, 13 July 1985, Page 16

Cost of insurance ‘could rise 25 per cent’

PA Wellington The cost of insurance premiums for the average New Zealander could in-' crease up to 25 per cent next year, said the executive director of the Insurance Council of New Zealand, Mr Trevor Roberts. Speaking at an Insurance Council seminar, Mr Roberts said the current Sremium pool of almost 800 million - the gross premiums collected by the fire and general part of the insurance industry — had to increase by ?204 million next year to keep the indus-

try at “roughly the same position in which we now are.” “We are on the edge of an affordability crisis — especially in the area of domestic and motor insurance,” he said. “We think that it is important that insurance remains an affordable thing for the whole community and we are concerned that we are moving rapidly in the direction where that might not be the case.” Mr Roberts said the increase would be the result — with the exception of the cost of increased crime — of factors beyond the control of the both the insurance industry and the community. The factors included the introduction of the fringe benefits tax, which meant insurers would have to collect an extra ?8 million in premiums or 1 per cent on “everybody’s premium bill,” he said.

The goods and services tax at an estimated rate of 15 per cent, would also add ?120 million per year to the cost of insurance. Devaluation and inflation would add another $BO million to that cost, he said. “The only one that the community and we as an industry have any direct control over is the cost of crime,” he said. The increase in the cost of premiums would be “too much — by tens of millions,” Mr Roberts said. He said the insurance industry was concerned that the inaffordability of insurance would create social problems. People who “cut corners” in their insurance cover were usually the most vulnerable in the community and included young families, beneficiaries, people on fixed incomes and the elderly, he said. “Insurance in the modem

economy is an essential service. “I suggest it would be wise to apply some social and economic restraint now in areas affecting the insurance mechanism,” Mi Roberts said. More than 30 per cent ol New Zealanders were eithei under-insured or not insurec at all, he said. Mr Roberts told the seminar that market surveys and information gleaned from claims made after disasters such as the Invercargill floods and Abbotsford landslip showed consistent under-insuring. “The pattern is remarkably consistent right across the country,” he said. “This, we believe, is significant” But it was also important that there had not been a significant deterioration in the level of under-insurance in the face of increasing inflation over years.