The Minister of Commerce and Consumer Affairs says the increase in severe weather events means the New Zealand insurance industry “has a more important role to play than ever”.
But he doesn’t think the government can do much to protect underinsured consumers.
The comments were made by Minister Andrew Bayly at the Insurance Council of New Zealand’s annual conference held at Auckland’s Hilton Hotel on Thursday.
The Insurance Council’s outgoing CEO Tim Grafton introduced Bayly to the conference before his keynote speech, describing him as “the closest we have to the Minister of Insurance”.
Grafton told attendees that if New Zealand didn’t meet the challenges of climate adaptation then the affordability of insurance would be “acute for some”.
He added the insurance industry already knew insurance affordability was at an acute stage for some people already.
“[If] we do nothing it will be far worse and will most likely attract market intervention, perhaps by government, and the market may well be less attractive to international capital,” he said.
Bayly said it was clear that as a country, New Zealand needed insurance security “more than ever” as the country faced down increased frequency and severity of climate change events and natural disasters.
“It’s evident we need to remain adaptable to meeting the evolving needs of kiwis, kiwi businesses and New Zealand itself,” he said.
“The insurance industry has a big part to play in that.”
Sitting down with conference MC Miriama Kamo after his keynote, Bayly was asked what the government was doing to protect underinsured consumers.
‘I'm not sure we can do much about it,” he replied, saying statistics showed that New Zealand was “pretty highly” insured from an individual basis of people.
Bayly said the bigger issue was rather than thinking about how the government could incentivise people to take up insurance, the role of government should actually be making sure that councils didn’t allow houses to be built on coastal areas or floodplains that were known to flood.
In response to a question about how large climate events were affecting New Zealand’s vulnerable sectors of society more severely due to not being able to afford insurance, Bayly said New Zealanders needed to be made wealthier.
“Poor people buy cheaper houses and cheaper houses are cheaper for a reason, often because they're in areas that are not as attractive for a whole range of reasons,” Bayly said.
“The main intervention is that we need to make New Zealanders wealthier.”
Bayly also said the government needs to be clearer around how it plans and deals with climate risk so reinsurers have more insight into the country’s climate change resilience and adaptation.
He’d been told by the insurance sector that reinsurance costs were skyrocketing in part because reinsurers felt there wasn’t enough clarity around national responses to severe weather events in New Zealand.
“I think there's probably an element of government being clear about what our policies are and working with councils and the insurance industry,” he said.
Kamo asked; "How worried are you [about climate change]?”
“If you want to see where climate change is happening, go to the North Pole,” he said.
In a panel about climate resilience after Bayly’s speech, IAG New Zealand’s CEO Amanda Whiting said IAG had five themes they kept in mind when discussing climate resilience – education, planning, connectedness, control and acceptance.
“It's actually really important if we're going to do all these things, we all have to accept that actually some will be winners and some will be losers, and that might be the impact of higher rates. It might be going as far as actually being removed from your home,” she said.
“What I think we need and what we've been lobbying for is some sort of horizontal view to pull all of those great pieces of work together. And I think central government can play a really important role in that.”
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