WEBVTT - How does an unstable climate impact your insurance? 0:00:00.320 --> 0:00:03.960 Car insurance and Mates Rates shares Is has teamed up 0:00:03.960 --> 0:00:07.320 with Cove to provide comprehensive car cover and a discounted 0:00:07.360 --> 0:00:10.160 price for Chaz's customers. A new way to protect your 0:00:10.160 --> 0:00:13.160 wealth from Life's podcast Get a Quote. 0:00:12.960 --> 0:00:20.640 Now, Cura Koto. If people talk about insurance, they're usually 0:00:20.640 --> 0:00:23.240 saying things like gosh, how much has it gone up? 0:00:23.360 --> 0:00:26.079 Or will it really be worth it? But understanding your 0:00:26.200 --> 0:00:28.400 risks and how you need to cover them, well, well 0:00:28.440 --> 0:00:31.440 that's crucial whether you're investing, we're just doing life. I'm 0:00:31.480 --> 0:00:34.440 Garth Bray and this is Shared Lunch. Today. We're with 0:00:34.720 --> 0:00:38.440 the Insurance Council's Chief executive, Chris Farfuey, for a lesson 0:00:38.600 --> 0:00:41.000 in how to cover those risks. But first he has 0:00:41.000 --> 0:00:42.200 some important information. 0:00:42.400 --> 0:00:45.000 Investing involves the risk you might lose the money you 0:00:45.000 --> 0:00:48.320 start with. We recommend talking to a licensed financial advisor. 0:00:49.000 --> 0:00:52.839 We also recommend reading product disclosure documents before deciding to invest. 0:00:53.120 --> 0:00:55.480 Everything you're about to see and here is current at 0:00:55.520 --> 0:00:56.240 the time of recording. 0:00:56.240 --> 0:00:59.320 Well, Mullowila, Chris, thanks for giving us some time my 0:00:59.480 --> 0:01:02.760 look to see it. Look, you represent an industry that, 0:01:03.040 --> 0:01:05.960 by now I reckon must have taken about ten billion 0:01:06.000 --> 0:01:08.920 dollars worth of premium in the last twelve months from 0:01:09.000 --> 0:01:12.120 New Zealand. It's that's gross written premium. I'm about right 0:01:12.160 --> 0:01:12.759 with that figure. 0:01:13.920 --> 0:01:18.479 Yeah, roughly give or take a millionaire a billion either. 0:01:18.400 --> 0:01:20.640 Side a billionare a billion there, you know, so you're 0:01:20.640 --> 0:01:22.960 talking about real money. Look five years ago though, that 0:01:23.000 --> 0:01:26.160 figure was about six point eight billion, so that's like 0:01:26.200 --> 0:01:28.560 a forty percent increase. And this is just off the 0:01:28.800 --> 0:01:30.840 figures that I saw on the on the public page 0:01:30.840 --> 0:01:34.440 at the Insurance Council. And across that period inflation has 0:01:34.480 --> 0:01:37.720 been about twenty percent, So it's quite a big gap. 0:01:38.400 --> 0:01:40.520 How do we get there? And when does it stop? 0:01:43.200 --> 0:01:43.920 How do we get there? 0:01:43.959 --> 0:01:47.400 It's the cost of repairing things and the cost of 0:01:48.360 --> 0:01:51.639 inputs into insurance have increased over time. 0:01:52.000 --> 0:01:53.680 I think most people wouldn't know that. 0:01:53.720 --> 0:01:57.520 We also collect on behalf of the government the funding 0:01:57.640 --> 0:02:00.720 for the foreign emergency, so the fence levy is part 0:02:00.800 --> 0:02:04.560 of people's premium. Also, we collect the levy for what 0:02:04.720 --> 0:02:08.000 used to be EQC is now the Natural Hazards Commission, 0:02:08.120 --> 0:02:14.880 So all of that goes into how premium is constructed. Also, importantly, 0:02:15.160 --> 0:02:18.079 you know the cost of repairing things has increased building 0:02:18.120 --> 0:02:22.280 and construction cars becoming more complex, so fixing them has 0:02:22.360 --> 0:02:25.800 become more expensive. But the other thing, as well, as 0:02:26.560 --> 0:02:29.720 as things kick off around the country, the ability to 0:02:29.760 --> 0:02:31.440 get reinsurance. 0:02:31.480 --> 0:02:32.600 Is becoming more challenging. 0:02:33.600 --> 0:02:36.239 And if people are watching and wondering what reinsurance is, 0:02:36.280 --> 0:02:39.919 it really is insurance for insurance that things get big 0:02:40.280 --> 0:02:43.160 and then that engages their insurance and the ability to 0:02:43.200 --> 0:02:46.079 get that is challenging. 0:02:46.120 --> 0:02:46.600 Over time. 0:02:46.760 --> 0:02:49.320 We do that, our members do that every year, and 0:02:49.480 --> 0:02:52.760 certainly the cost of reinsurance is going up, primarily because 0:02:52.800 --> 0:02:56.680 as you've probably seen more recently, climate related events like 0:02:56.760 --> 0:03:01.399 cyclones around the world mean that more people are looking 0:03:01.440 --> 0:03:04.680 for reinsurance. And when that happens globally, we do serve 0:03:04.840 --> 0:03:07.360 CESPI compricing. We're hoping that that levels out in the 0:03:07.400 --> 0:03:10.160 next three or four years, but certainly the trend has 0:03:10.200 --> 0:03:11.840 been in the last two or three years and when 0:03:11.840 --> 0:03:13.680 we've had events here in New Zealand that that cost 0:03:13.720 --> 0:03:15.560 of insurance has increased. 0:03:15.680 --> 0:03:17.600 You've touched on quite a number of issues there. But 0:03:17.919 --> 0:03:20.200 I suppose I should just clarify that the numbers we're 0:03:20.200 --> 0:03:23.240 talking about before, they don't include things like life insurance 0:03:23.520 --> 0:03:27.600 or health or income protection. That's not where the Insurance 0:03:27.639 --> 0:03:30.600 Council members cover, right, Yeah, so your members are the 0:03:30.639 --> 0:03:35.080 companies that offer general insurance, you know, people's homes, contents, 0:03:35.160 --> 0:03:38.880 business assets, and cars. Gosh, when I took a look 0:03:39.520 --> 0:03:43.080 Motivacle insurance, that's like a three billion dollar industry in 0:03:43.160 --> 0:03:46.320 terms of that gross written premium, and so that looks 0:03:46.320 --> 0:03:49.160 bigger than homes or contents or any other sector and 0:03:49.240 --> 0:03:52.880 with lower claims growth. So is that business in some 0:03:52.920 --> 0:03:55.440 sense kind of subsidizing or propping up the rest of 0:03:55.480 --> 0:03:58.160 the insurance business? And I guess could the prices be 0:03:58.200 --> 0:03:59.080 a bit sharper there? 0:04:00.120 --> 0:04:01.240 I don't think it is, probably it up. 0:04:01.280 --> 0:04:03.720 I think when you know our members, they look across 0:04:03.720 --> 0:04:06.400 all their box in there what we call lines of insurance, 0:04:06.400 --> 0:04:08.920 whether it be house and contents, or whether it be home, 0:04:09.080 --> 0:04:11.200 or whether it be murder. 0:04:11.360 --> 0:04:13.400 As you say, they are. 0:04:13.280 --> 0:04:15.880 All running their own operations and taking their own kind 0:04:15.920 --> 0:04:21.200 of levels of risk, more so in home insurance than 0:04:22.240 --> 0:04:26.040 moder that's pretty finite depending on what you're doing with 0:04:26.040 --> 0:04:29.279 a car as well. So what I would say to 0:04:29.320 --> 0:04:33.360 your question, Garth, is that they're all pretty competitive. They 0:04:33.440 --> 0:04:37.039 want to take business off each other, but in a 0:04:37.160 --> 0:04:39.680 general sense that the cost of ensuring and the cost 0:04:39.720 --> 0:04:42.880 of repairing is becoming more challenging for news yalders. We 0:04:43.000 --> 0:04:45.839 understand that that's because the cost of fixing some of 0:04:45.880 --> 0:04:49.159 these things like cars and repairing homes is becoming more 0:04:49.160 --> 0:04:50.480 expensive over time as well. 0:04:50.600 --> 0:04:52.920 So you've got the global chip shortage, right, Apparently that's 0:04:52.920 --> 0:04:56.040 a problem that it's making new cars more expensive, which 0:04:56.080 --> 0:04:58.760 means it's more likely you want to repair, and all 0:04:58.800 --> 0:05:01.440 of that is pushing up and insurance premium for motor vehicles. 0:05:01.480 --> 0:05:02.760 Is that what you're hearing too. 0:05:03.040 --> 0:05:07.080 Yeah, cars are becoming more complex. I've got an old 0:05:07.200 --> 0:05:11.359 Holden Captiva. It's pretty relatively easy to fix. But someone 0:05:11.400 --> 0:05:14.400 with a more modern car, which is more complex and 0:05:14.520 --> 0:05:17.919 the componentry and the digital nature of them, it is 0:05:18.000 --> 0:05:18.760 harder to fix. 0:05:19.080 --> 0:05:22.160 I think if we want to talk about homes as well, right, 0:05:22.200 --> 0:05:25.239 because for most they're still the biggest asset that people 0:05:25.279 --> 0:05:28.520 either own or would sort of hope to own. I 0:05:28.560 --> 0:05:30.760 did a little bit of research the Reserve Bank looked 0:05:30.800 --> 0:05:36.200 at the insurance price cycle and dwelling insurance inflation. It 0:05:36.279 --> 0:05:39.120 jumped about forty four percent in twenty twelve following the 0:05:39.360 --> 0:05:44.800 Canterbury earthquakes. In twenty eighteen after the Kikuta earthquake, it 0:05:45.040 --> 0:05:48.640 A bouts up about eighteen percent and on their numbers 0:05:48.640 --> 0:05:51.000 at the Reserve Bank twenty five percent this year after 0:05:51.040 --> 0:05:55.480 the North Island weather events and previously those two events, 0:05:55.480 --> 0:05:58.440 that took about two years for the for the premium 0:05:58.560 --> 0:06:02.880 growth to track down closer towards inflation. Should households just 0:06:02.960 --> 0:06:07.240 expect that's the pattern after a big catastrophe look forward 0:06:07.279 --> 0:06:09.760 to price increases on insurance premiums for a couple of 0:06:09.800 --> 0:06:10.719 years two to three. 0:06:10.839 --> 0:06:11.039 Yeah. 0:06:11.040 --> 0:06:13.880 That by the Razent Bank back in through their Financial 0:06:13.920 --> 0:06:17.960 Stability Report, I think was really useful. Gave context from 0:06:18.040 --> 0:06:21.960 the regulator about understanding how the rhythm of events works 0:06:22.080 --> 0:06:24.920 now when we do have an event. As I mentioned before, 0:06:25.000 --> 0:06:28.080 the reinsurers who look after our insurers when a big 0:06:28.120 --> 0:06:31.040 event kicks off, take another look at the market and 0:06:31.080 --> 0:06:34.680 they try and make sure that they reassess it what 0:06:34.880 --> 0:06:39.000 is the right amount of reinsurance capacity to send to 0:06:39.080 --> 0:06:41.479 New Zealand and what that price is. And there's a 0:06:41.880 --> 0:06:44.000 kind of a settling of the dust that happens after 0:06:44.080 --> 0:06:46.599 a big event as you mentioned certainly happened after christ 0:06:46.680 --> 0:06:48.919 Church and some serious discussions had to happen there to 0:06:48.960 --> 0:06:53.240 make sure that our members could get that reinsurance in 0:06:53.360 --> 0:06:57.080 order to continue to offer insurance, especially to the christ 0:06:57.120 --> 0:07:00.800 Church market. That happened again in co coulda Those were 0:07:00.800 --> 0:07:06.120 two searsmic events and a lot of our risk At 0:07:06.120 --> 0:07:09.600 that stage everyone knew that it was searsmic. We saw 0:07:09.640 --> 0:07:12.840 something similar happen after the Aukland Anniversary floods and cycle 0:07:12.880 --> 0:07:17.360 and Gabrielle of earlier last year that that obviously was 0:07:17.440 --> 0:07:21.360 a climate related event. And when that happened, the Rensherer 0:07:21.360 --> 0:07:24.520 has had another good look at New Zealand and the 0:07:24.600 --> 0:07:30.200 risk profile of it, put their their hands to their 0:07:30.280 --> 0:07:32.360 chins and said, and we have to have a bit 0:07:32.360 --> 0:07:34.680 of a think about this in terms of the risk 0:07:34.760 --> 0:07:37.160 that New Zealand poses now, so we've got this double 0:07:37.240 --> 0:07:40.840 layer of assessment of New Zealand both seismic which has 0:07:40.880 --> 0:07:43.960 been traditional, but also climate. 0:07:44.040 --> 0:07:44.160 Now. 0:07:44.280 --> 0:07:47.040 Just to put that in context, Garth, I think kind 0:07:47.040 --> 0:07:52.640 of for the years prior to twenty twenty three, members 0:07:52.760 --> 0:07:55.920 traditionally for weather related events would have paid out at about 0:07:55.880 --> 0:08:00.360 three hundred and fifty million dollars per annum max on 0:08:00.440 --> 0:08:03.120 kind of weather related events. There were obviously kind of 0:08:03.120 --> 0:08:07.960 smaller events that event of last year. I think we're 0:08:08.000 --> 0:08:11.360 close to having paid out about three point eight billion dollars, 0:08:11.960 --> 0:08:14.200 so that event is ten times bigger than what we 0:08:14.240 --> 0:08:16.960 would expect. So, as you can imagine, we've got some 0:08:17.040 --> 0:08:20.480 attention from the reinsurers and that's why people are finding 0:08:20.520 --> 0:08:23.200 it a little bit more difficult at the moment in 0:08:23.280 --> 0:08:25.760 terms of the premiums. But as you probably also saw, 0:08:26.200 --> 0:08:28.800 and as you've mentioned, that plateau is out over time. 0:08:28.880 --> 0:08:31.040 Once that kind of new equilibrium. 0:08:30.440 --> 0:08:34.680 Is found, did the insurers get to a point where 0:08:34.720 --> 0:08:36.880 maybe they weren't going to be able to access some 0:08:36.920 --> 0:08:38.000 of that reinsurance. 0:08:38.760 --> 0:08:41.600 Look, I think it's not necessarily challenge to accesses, but 0:08:41.640 --> 0:08:44.680 it is a it is a more complex discussion for 0:08:44.760 --> 0:08:48.280 them to have. And at a macro New Zealand ink level, 0:08:48.320 --> 0:08:51.160 we need to make sure that New Zealanders a country 0:08:51.280 --> 0:08:55.480 is saying to reinsure as that because of this increased 0:08:55.520 --> 0:08:59.120 climate risk that is now a reality, what are we 0:08:59.200 --> 0:09:02.680 doing to mitigate and reduce the risk and therefore the 0:09:02.760 --> 0:09:07.800 claims to New Zealanders. We're certainly lobbying hard to the 0:09:07.840 --> 0:09:10.400 government around its climate adaptation work to say that we 0:09:10.400 --> 0:09:13.720 should get ahead of this. What are we doing to 0:09:13.840 --> 0:09:16.560 ensure that we've got infrastructure in the likes of the 0:09:16.559 --> 0:09:19.400 Hawks Bay Auckland, for example, because of those north Old 0:09:19.480 --> 0:09:22.120 weather events, to say, if this happens again, how do 0:09:22.160 --> 0:09:24.400 we ensure there isn't a flooding to the extent that 0:09:24.440 --> 0:09:27.040 we've got, And what kind of planning decisions are we 0:09:27.160 --> 0:09:30.320 making to ensure we're not building in places where we 0:09:30.360 --> 0:09:34.880 shouldn't Because I think there's a history, and some of 0:09:34.920 --> 0:09:36.840 it is explainable, and some of it is in New 0:09:36.920 --> 0:09:40.400 Zealand that we are building communities and places where there's 0:09:40.840 --> 0:09:44.320 obvious natural hazard risk and we can't continue to do 0:09:44.360 --> 0:09:48.240 that in the future because the reinsurers will say, well, 0:09:48.280 --> 0:09:52.400 why is that happening? We're not necessarily we won't necessarily 0:09:52.440 --> 0:09:54.720 have the appetite to cover that risk in the future. 0:09:55.480 --> 0:09:57.480 I think it was how one of your members that 0:09:57.520 --> 0:10:00.319 told the market earlier this year the unpalatable try truth 0:10:00.559 --> 0:10:04.760 is not everyone is or will be able to ensure 0:10:04.800 --> 0:10:07.240 their home the way they do now? Is that pretty 0:10:07.240 --> 0:10:10.280 common view around the board table there at the insurance Council. 0:10:11.000 --> 0:10:12.760 Yeah, Well, each of our members have got their own 0:10:12.800 --> 0:10:17.679 appetite as to what they'll cover, but it certainly from 0:10:17.720 --> 0:10:22.520 what we're expecting in terms of increased severity of weather 0:10:22.600 --> 0:10:25.680 events and increase frequency of weather events and what we 0:10:25.720 --> 0:10:31.480 know about coastal risk and kind of floodplaining pro prine areas. 0:10:31.880 --> 0:10:35.440 Insurers and councils and governments are taking a much closer 0:10:35.480 --> 0:10:37.840 look at those kinds of things as well. Not only 0:10:37.880 --> 0:10:40.240 did we pay out three point eight billion dollars as 0:10:40.240 --> 0:10:42.600 a result of last year's where the events, but the 0:10:42.640 --> 0:10:45.360 Crown also forked out quite a lot of money as 0:10:45.440 --> 0:10:48.959 the councils to make sure that people in red zones 0:10:49.080 --> 0:10:52.920 could be compensated and confines new places to live. So 0:10:53.480 --> 0:10:57.720 there's awareness from the government, from local government and also 0:10:57.800 --> 0:11:00.400 the private sector that we actually need to change things 0:11:00.640 --> 0:11:02.600 in order to make sure we can reduce that risk. 0:11:02.920 --> 0:11:05.880 There's going to mean some challenging conversations in the future 0:11:06.280 --> 0:11:10.280 for some communities, but also the ability to get insurance 0:11:10.360 --> 0:11:13.480 will become challenging, especially if we do nothing, which is 0:11:13.480 --> 0:11:15.120 why we're pushing as hard as we can to make 0:11:15.120 --> 0:11:18.080 sure we are kind of having the conversation about infrastructure 0:11:18.080 --> 0:11:20.400 built in the right place and to the right standards 0:11:20.400 --> 0:11:22.079 to protect communities and households. 0:11:22.360 --> 0:11:24.680 If we can do that, our story. 0:11:24.360 --> 0:11:28.920 To our reinsurers is a much better story to conversation 0:11:29.040 --> 0:11:31.880 to have so they can keep seeing that reinsurance capacity 0:11:31.920 --> 0:11:34.280 to New Zealand and also at a price that is 0:11:34.440 --> 0:11:37.880 affordable to these elders. It's the sustainability of the market 0:11:38.040 --> 0:11:40.840 in the future and the medium to long term is challenging. 0:11:41.440 --> 0:11:43.160 But we want to work with anyone who can make 0:11:43.200 --> 0:11:46.079 sure that that risk profile can be reduced. 0:11:47.040 --> 0:11:50.160 You say in the future, but I mean given insurance 0:11:50.200 --> 0:11:54.600 contracts typically run for about a year completely withdrawing cover 0:11:54.679 --> 0:11:57.240 to an area like a suburb or town, even that 0:11:57.440 --> 0:11:58.880 could happen pretty quickly, couldn't it. 0:11:58.920 --> 0:12:00.839 Yeah, And we weren't necessarily be the ones who make 0:12:00.880 --> 0:12:04.360 that decision. You know, we'll have to kind of work 0:12:04.400 --> 0:12:07.160 with central government and local government to understand what the 0:12:07.160 --> 0:12:12.000 future of an area is. Certainly, through some pricing signals, 0:12:12.040 --> 0:12:16.000 some of our members are saying this area is riskier 0:12:16.040 --> 0:12:19.400 than others. But you know, the conversation about whether or 0:12:19.400 --> 0:12:22.040 not a community has a future or not shouldn't just 0:12:22.480 --> 0:12:25.640 ride on the price of an insurance premium. It has 0:12:25.640 --> 0:12:28.640 to be a discussion that central government and local government 0:12:28.679 --> 0:12:32.040 also lead to make sure the right kind of decisions 0:12:32.080 --> 0:12:34.440 are being made and they go through a process and 0:12:34.480 --> 0:12:36.440 work with communities to do that. You can't just say 0:12:36.840 --> 0:12:39.120 you know, upstacks or where are people going to go? 0:12:39.760 --> 0:12:43.200 And certainly we've been heartened by the conversations that we've 0:12:43.240 --> 0:12:46.439 had with Parliament via the Sect Committee that's just done 0:12:46.480 --> 0:12:50.000 an inquiry into adaptation and the National Adaptation Plan that 0:12:50.200 --> 0:12:54.000 was undertaken by James Shaw and the previous government kind 0:12:54.000 --> 0:12:56.600 of set some good work too. And I think we're 0:12:56.600 --> 0:12:58.520 probably going to come to a head pretty soon because 0:12:58.520 --> 0:13:03.800 I think councils, banks, insurers, local government and central government 0:13:03.800 --> 0:13:07.320 are predicin that we're working with communities so they can 0:13:07.320 --> 0:13:09.280 get an understanding of what the future holds to them. 0:13:09.280 --> 0:13:12.400 It's not just insurance, it's the value of their assets 0:13:12.440 --> 0:13:15.400 as well, and that's something that is well beyond the 0:13:15.400 --> 0:13:16.720 remit of insurance itself. 0:13:17.800 --> 0:13:21.520 Just quickly, I guess, given that ensurability of homes is 0:13:21.520 --> 0:13:25.040 getting more expensive and trickier, does that change people's views 0:13:25.080 --> 0:13:28.360 potentially about perceptions of property as an asset class. Is 0:13:28.400 --> 0:13:30.600 it going to lead people perhaps to think about equities 0:13:30.640 --> 0:13:32.360 and other kinds of things, maybe saying case it's too 0:13:32.440 --> 0:13:33.199 risky to one at home. 0:13:33.920 --> 0:13:36.240 A lot of people need to own home to live in, 0:13:36.840 --> 0:13:39.319 and I think, you know, that kind of sense of 0:13:39.360 --> 0:13:41.400 the key we dream still needs to be there. I 0:13:41.480 --> 0:13:43.839 just think it'll be really useful now. I think if 0:13:43.840 --> 0:13:46.640 we're doing everything as we can as a sector to 0:13:46.640 --> 0:13:50.880 give kiwis the best available information for them to make decisions. 0:13:51.320 --> 0:13:52.640 You'll go and by home, and a lot of that 0:13:52.679 --> 0:13:55.120 can be based on an emotion and price. But what 0:13:55.160 --> 0:13:57.199 we would ask people to do is make sure that 0:13:57.280 --> 0:13:59.240 you know, you think about insurance as part of that 0:13:59.320 --> 0:14:01.760 purchase process as well. It's not just the thing that 0:14:01.840 --> 0:14:04.080 you have to get to get a mortgage, it's you 0:14:04.200 --> 0:14:10.480 understand the risk involved in whatever you're buying, where it is, 0:14:11.679 --> 0:14:14.120 the impact on your insurance premium, and then that they 0:14:14.120 --> 0:14:17.880 shop around. You know, most places in New Zealanders in 0:14:17.920 --> 0:14:22.280 New Zealand are still getting insurance, so you do have 0:14:22.320 --> 0:14:24.560 to shop around a bit to kind of understand what 0:14:24.600 --> 0:14:25.920 you can get and where you can get it. 0:14:26.000 --> 0:14:28.480 I'm sort of mentally having to stop myself calling you 0:14:28.560 --> 0:14:31.800 minister because the last time and I folk. 0:14:31.760 --> 0:14:33.400 That way, people call me a lot of things and 0:14:33.400 --> 0:14:34.480 they don't call me that anymore. 0:14:34.680 --> 0:14:37.560 Well, Chris, I'm having to mentally stop myself from calling 0:14:37.560 --> 0:14:39.200 you minister, because last time you and I spoke, you 0:14:39.240 --> 0:14:41.160 were still in Cabinet. I mean you did five and 0:14:41.200 --> 0:14:45.320 a half years there. You were the Minister for Emergency 0:14:45.360 --> 0:14:48.440 Management and Civil Defense, I think, and justice and let's 0:14:48.480 --> 0:14:52.200 not forget broadcasting and immigration during the COVID lockdowns when 0:14:52.200 --> 0:14:54.200 all we did was watched TV and wonder about where 0:14:54.200 --> 0:14:57.960 we couldn't go. So I just wonder you've stepped in 0:14:58.000 --> 0:15:01.440 as the chief Executive of the Insurance Council after those 0:15:01.480 --> 0:15:05.480 devastating floods up here in Auckland start of last year, 0:15:05.520 --> 0:15:09.040 after Cyclone Gabriel. Of course, so much damage, you know, 0:15:09.400 --> 0:15:13.120 took lives and costs so much to the industry. Are 0:15:13.120 --> 0:15:16.320 you an insurance insider Now, I. 0:15:16.320 --> 0:15:19.280 Wouldn't say I'm an insider, yet I'm an outsider that's 0:15:19.320 --> 0:15:22.480 come in. I like really complex problems, which is probably 0:15:22.480 --> 0:15:25.680 why I was given the portfolio as I was given 0:15:25.840 --> 0:15:29.479 in cabinet, and I really enjoyed both the commerce portfolio 0:15:29.520 --> 0:15:33.160 and also emergency management. So I've been able to use 0:15:33.720 --> 0:15:36.200 the context of those and certainly the networks that I've 0:15:36.720 --> 0:15:40.320 built over time to be able to effect some change here. 0:15:40.400 --> 0:15:43.080 We do have the insurance set down in New Zealand 0:15:43.080 --> 0:15:46.800 does have some complex problems around climate adaptation in front 0:15:46.800 --> 0:15:50.160 of it. I'm actually confident that there is a pathway 0:15:50.760 --> 0:15:53.440 to meeting that challenge, and I spent quite forward thinking 0:15:53.720 --> 0:15:58.320 about that and it's my job to kind of get 0:15:58.360 --> 0:16:01.680 the insurance sector's voice and opinion into some of that. 0:16:02.360 --> 0:16:04.880 I'm really lucky I've got a really proactive board who 0:16:05.320 --> 0:16:07.560 does see the end zet ink challenge in this as 0:16:07.600 --> 0:16:11.960 well as the sustainability of their industry and the long 0:16:12.080 --> 0:16:15.400 term as well. There's some pretty difficult conversations that need 0:16:15.440 --> 0:16:18.000 to happen and insurance needs to be part of that 0:16:18.080 --> 0:16:20.960 as well. We'll kind of enter some of those tricky 0:16:20.960 --> 0:16:24.160 places where we may not have gone to before because 0:16:24.160 --> 0:16:26.000 we do want to make sure that we're advancing it. 0:16:26.040 --> 0:16:28.320 I think the worst thing that could happen for New 0:16:28.400 --> 0:16:30.720 Zealand and to our sectors we just sat on our hands. 0:16:30.720 --> 0:16:33.760 When we know that the frequency and severity of the 0:16:33.840 --> 0:16:37.960 climate change climate related challenges are upon us. We just 0:16:38.000 --> 0:16:40.920 have to speak to anyone in the Hawks Bay, tider 0:16:40.960 --> 0:16:44.040 Fitty and Auckland, those areas that were affected that if 0:16:44.040 --> 0:16:48.080 we don't learn from this and make sure that the 0:16:48.120 --> 0:16:49.880 ability of New Zealander is to have the peace of 0:16:49.960 --> 0:16:53.040 mind of insurance is still there and affordable and available, 0:16:53.840 --> 0:16:55.360 that you know, a lot of that asset value that 0:16:55.400 --> 0:16:57.880 we talked about becomes difficult, a lot of future of 0:16:57.880 --> 0:17:01.440 communities becomes difficult, work hard to kind of maintain the 0:17:01.880 --> 0:17:03.840 happy medium and equilibrium that we've got. 0:17:03.720 --> 0:17:08.080 Now your time in politics and I think as communistments, 0:17:08.119 --> 0:17:10.800 so that you know, the community ComCom started market studies. 0:17:10.840 --> 0:17:13.400 I think we've got one in banking right now. We've 0:17:13.440 --> 0:17:17.200 had them for supermarkets, we've had them for building materials 0:17:17.240 --> 0:17:21.680 and for the fuel patrons. On what would a market 0:17:21.760 --> 0:17:23.480 study of insurance show us? 0:17:24.560 --> 0:17:26.840 Well, look, I think we've got about just a little 0:17:26.840 --> 0:17:30.080 over twenty general insurance in New Zealand. We've got two 0:17:30.160 --> 0:17:34.080 or three kind of large players in the in the 0:17:34.280 --> 0:17:37.560 in the country as well. I think the benefit of 0:17:37.920 --> 0:17:40.159 some of that structure is that at least two of 0:17:40.160 --> 0:17:42.720 them are kind of Australian only got Australian parents. So 0:17:43.359 --> 0:17:46.320 when we go shopping for reinsurance, we don't just go 0:17:46.359 --> 0:17:48.080 as in New Zealand, we go as Australia and New 0:17:48.119 --> 0:17:51.760 Zealand and we're able to have some kind of economies 0:17:51.800 --> 0:17:54.480 of scale there and buy and power as good for 0:17:54.560 --> 0:17:58.840 us there. I think generally there is good competition in 0:17:58.880 --> 0:18:01.800 the market, so you know, we do see some fierce 0:18:02.160 --> 0:18:06.639 competition to make sure pricing and products are there. I 0:18:06.680 --> 0:18:09.400 think you'll probably see in the product space much more 0:18:09.400 --> 0:18:13.600 innovation in the future because of what's happening in terms 0:18:13.640 --> 0:18:16.160 of climate change. But one of my jobs is to 0:18:16.440 --> 0:18:18.520 do what I did at the beginning of this interview 0:18:18.560 --> 0:18:23.199 and just let people know how insurance premium is constructed 0:18:23.280 --> 0:18:25.520 and that we do have to go offshore to buy 0:18:25.520 --> 0:18:29.679 a rather large component of the input into an insurance policy, 0:18:29.680 --> 0:18:33.440 which is a reinsurance It's a global price. We bargain hard, 0:18:33.480 --> 0:18:35.720 but we do have to kind of go with whatever 0:18:35.760 --> 0:18:39.359 the wins of the global reinsurance market is. So I 0:18:39.400 --> 0:18:41.480 think one of our jobs is to make sure that 0:18:41.480 --> 0:18:45.720 this system understands how insurance works and keep being on 0:18:45.800 --> 0:18:49.040 about that. You know, we're taking a minister to London 0:18:49.080 --> 0:18:53.639 to make sure that they understand how reinsurance works as well, 0:18:54.119 --> 0:18:57.199 making sure our kind of local government and other central 0:18:57.400 --> 0:19:00.959 government members a part of understanding as well, so when 0:19:01.000 --> 0:19:03.200 they're looking at it in terms of policy in the future. 0:19:04.040 --> 0:19:09.320 They understand how the market works, so as the minister 0:19:09.359 --> 0:19:12.840 who introduced market studies are there for a purpose. But 0:19:12.880 --> 0:19:16.040 I would say that the currently the insurance market's working 0:19:16.080 --> 0:19:17.119 pretty well. 0:19:17.320 --> 0:19:19.880 Chris, looking ahead five years, if you try to take 0:19:19.880 --> 0:19:23.680 a five year view of the insurance industry, same same, 0:19:23.960 --> 0:19:25.520 all different. I mean, we're still going to have those 0:19:25.560 --> 0:19:29.280 two big Australian mega brands pretty much covering most of 0:19:29.280 --> 0:19:29.960 what people do. 0:19:31.240 --> 0:19:33.639 Oh, that's not for me to say that. There's a 0:19:33.640 --> 0:19:36.119 whole lot of other factors that go into that, but 0:19:36.200 --> 0:19:38.400 I think what they are interested in is making sure 0:19:38.440 --> 0:19:41.880 that the market is still strong and sustainable. I mean, 0:19:42.320 --> 0:19:44.080 I think one of the questions you're probably gonna ask 0:19:44.160 --> 0:19:45.919 is whether they're not insurance is a grud to purchase. 0:19:45.960 --> 0:19:47.680 I don't think it's a grudge purchase. I think it's 0:19:47.680 --> 0:19:50.600 a grudge payment. People don't like paying for it, but 0:19:50.640 --> 0:19:54.119 they do understand that they need it. So having that 0:19:54.240 --> 0:19:57.560 availability for New Zealanders is really important. You know, these 0:19:57.560 --> 0:20:01.280 in this relationship with insurance is pretty They make sure 0:20:01.320 --> 0:20:03.560 they've got most people, make sure they've got coverage for 0:20:03.600 --> 0:20:06.320 their car, and that we've still got coverage and the 0:20:06.440 --> 0:20:10.080 house market of well into the nineties, So we want 0:20:10.119 --> 0:20:12.720 to make sure that that kind of relationship with insurance 0:20:12.720 --> 0:20:16.359 has maintained. Prices are a big factor in that, and 0:20:16.440 --> 0:20:19.399 making sure people do understand how that price has arrived 0:20:19.400 --> 0:20:20.960 at is one of the things that we have to 0:20:20.960 --> 0:20:23.439 do a better job at, not just with consumers, but 0:20:23.480 --> 0:20:27.720 also with regulators and politicians who have the leavers of policy. 0:20:28.200 --> 0:20:31.719 What about I suppose the insure text, the nimble companies 0:20:31.720 --> 0:20:33.360 that are going to come to market. What's the role 0:20:33.520 --> 0:20:36.200 for them and are they part of your club? 0:20:37.600 --> 0:20:40.960 Well, they're not members, if that's what part of the 0:20:41.000 --> 0:20:45.040 club has meant. Are they being innovative? Yes, but so 0:20:45.119 --> 0:20:48.320 are our members. And I think the way that our 0:20:48.359 --> 0:20:54.280 members are kind of developing products, developing pricing, certainly using 0:20:54.400 --> 0:20:57.800 technology to be more efficient in their processes in an 0:20:57.800 --> 0:21:01.040