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Speaker 1: Heather dupers the l The government's announced it's looking into

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Speaker 1: why your insurance premiums are so high. Now, The Herald,

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Speaker 1: Wellington Business editor jen Atibstraney says the exercise is worthy,

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Speaker 1: but probably not going to change a lot for you

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Speaker 1: if you have home insurance and Jine's with us now, Jenae, Hello, hi, Heather,

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Speaker 1: Now why do you think this?

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Speaker 2: Well, firstly, I believe that this government at least is

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Speaker 2: not interested in interfering with the market. The market is

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Speaker 2: actually conveniently helping the government by making it too expensive

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Speaker 2: for you to get insurance and risky paces. I mean

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Speaker 2: this has been happening, you know, for some time in

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Speaker 2: Wellington due to earthquake risk, and we're seeing it increasingly

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Speaker 2: with flood risk. It's actually convenient for the government if

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Speaker 2: the insurance becomes too expensive and people move to safer places.

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Speaker 2: I think the government's kind of aware that if it

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Speaker 2: sort of tries to soften the blow of the risk

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Speaker 2: based seeing the insurers do, it could create moral hazards.

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Speaker 2: So it could make you think, well, I may as

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Speaker 2: well just move somewhere risky because the government will bail

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Speaker 2: me out anyway, you know, And that's not particularly helpful.

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Speaker 2: So I think that's one fact. Also, back in twenty

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Speaker 2: twenty four, I talked to Nikola Willis about why she

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Speaker 2: had got the Treasury to stop looking at how the

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Speaker 2: government could respond to risk based pricing. Treasury was doing

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Speaker 2: some policy work at the time she wanted it stopped,

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Speaker 2: and she said, look, she wasn't going to intervene in

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Speaker 2: the market, That's what she said back in twenty twenty four,

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Speaker 2: and that, you know, the government was better placed looking

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Speaker 2: at climate adaptation, you know, issues around consenting that type

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Speaker 2: of thing. So basically, I genuinely don't think the government

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Speaker 2: is interested in intervening in the market.

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Speaker 1: Okay, that is fair enough, But can they not assist

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Speaker 1: I mean, regardless of whether they want to intervene or not.

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Speaker 1: And I think they are doing the right thing. It

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Speaker 1: is becoming unaffordable for some people, and you could argue

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Speaker 1: people who are actually not at that much risk because

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Speaker 1: of the way the thing is priced. Could they not

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Speaker 1: change things about the capital requirements for insurance companies to

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Speaker 1: make it a bit cheaper?

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Speaker 2: Yeah, you know, so, I mean, this is the thing

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Speaker 2: with this whole topic. I agree entirely that it is

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Speaker 2: you know, rough, and it's unfair. And if you know

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Speaker 2: you've bought a piece of land and you plan to

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Speaker 2: build on it and that's your retirement plan, and you've

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Speaker 2: never seen it flood, and then suddenly the government comes

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Speaker 2: in and says you can't build on it now because

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Speaker 2: of climate change, you know you're not going to be

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Speaker 2: particularly happy. So of course, you know, it's a tough issue.

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Speaker 2: That the issue. Yeah, the area that I think the

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Speaker 2: government might move on is the amount of capital that

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Speaker 2: it requires, all that the Reserve Bank requires insurers to hold.

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Speaker 2: So people will recall that recently the Reserve Bank said

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Speaker 2: it would allow banks to hold less capital or less

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Speaker 2: costly capital, because the bank said that the cost of

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Speaker 2: holding all this capital to make them strong was too

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Speaker 2: high and if they could hold a bit less, they

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Speaker 2: might lend more freely and interest rates on borrowing might

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Speaker 2: be a bit lower. Now, the insurance industry makes kind

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Speaker 2: of a similar argument. You know, it's been saying that

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Speaker 2: the Reserve Bank's been too tough, been too mean, you know,

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Speaker 2: made them be way stronger than they need to be,

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Speaker 2: and maybe if they could hold less capital, then the

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Speaker 2: insurance premiums could come down. So that's something the industry

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Speaker 2: has been pushing for the government is cognizant of that,

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Speaker 2: but again I'm sort of skeptical. For me and you

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Speaker 2: you know, normal people with insurance, I'm not sure if

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Speaker 2: that will translate to much lower premiums. You know, one

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Speaker 2: other area here is that the government could do more

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Speaker 2: by expanding what the National Hazards Commission covers. That's like

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Speaker 2: the EQUC. It's knuckled the Natural Hazards Commission. You know,

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Speaker 2: if that covered flood you know, that could do a

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Speaker 2: bit more having a state insurer pick up more of

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Speaker 2: the low but the moral has But again, so the

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Speaker 2: whole mora hazardly exactly, I don't think that's something the

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Speaker 2: government wants to do. So, you know, the insurance industry

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Speaker 2: says that the problem is not the insurance, but the

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Speaker 2: problem is the risk and you have to manage the risk.

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Speaker 2: And to me that that makes sense. But it's just

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Speaker 2: it's just really hard.

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Speaker 1: Okay, I mean, do you so having said that, because

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Speaker 1: I mean I think we all understand. Sure, if you

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Speaker 1: if you've built a house in a place that's going

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Speaker 1: to get flooded every year, you probably shouldn't have insurance

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Speaker 1: or you should pay a lot for it. But when

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Speaker 1: you look at it, it is not that nuanced by

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Speaker 1: these these insurance companies is a second tire post code.

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Speaker 1: So is it possible that this review may actually sure

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Speaker 1: not lead to lower insurance premiums for us, but it

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Speaker 1: may at least answer some questions for us as to

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Speaker 1: how these guys are doing it, because I feel like

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Speaker 1: the clarity is what we want here.

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Speaker 2: Yeah, look, I mean I really I hope it does.

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Speaker 2: It's six months long, and the government's got representatives from

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Speaker 2: across you know, Reserve Bank if you may m be

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Speaker 2: a whole bunch of them to do it. The challenge

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Speaker 2: will be, gosh, I sound so negative on this issue,

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Speaker 2: but the challenge will be a lot of this information

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Speaker 2: is commercially sensitive. So I'm an insurance company. I pay

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Speaker 2: a lot of money for a modeling company that looks

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Speaker 2: at specific you know, address level, slip risk, flood risk,

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Speaker 2: all the rest of it. And that's how I do

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Speaker 2: my fancy mass, and that's how I decide that my

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Speaker 2: premium is this and my neighbor's premium is something completely different.

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Speaker 2: So I strongly doubt that the insurers will release the

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Speaker 2: sort of granular information that would give us a really

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Speaker 2: good insight because of commercial sensitivity, and I'm not sure

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Speaker 2: if the government will be able to compel them to

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Speaker 2: do that, but I think broader stuff like information around

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Speaker 2: what the reinsurance market is doing. You know, that's the

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Speaker 2: market that backs up the insurers. They are the ones

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Speaker 2: that really influence pricing heavily. I think getting a bit

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Speaker 2: more insight into that market would be useful, maybe that

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Speaker 2: the building costs. That's another thing again, complex market and

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Speaker 2: I just don't see a quick, easy fix. And it's

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Speaker 2: also a global issue. Zones is not the only country

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Speaker 2: country battling.

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Speaker 1: Context that I think is important. Jane, thank you very much,

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Speaker 1: as always appreciate your explanation. Jane to Trani, the heralds

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Speaker 1: Wellington Business Editor. For more from Hither Duplessy Allen Drive.

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Speaker 1: Listen live to news talks. It'd be from four pm weekdays,

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