1 00:00:00,120 --> 00:00:02,520 Speaker 1: First of all, though, from Milford Acid Management, Michael Luke 2 00:00:02,560 --> 00:00:06,800 Speaker 1: Kmichael hey Heaver, what's by the increase in Tower Insurance's 3 00:00:06,840 --> 00:00:08,280 Speaker 1: profit expectations yesterday? 4 00:00:09,119 --> 00:00:11,760 Speaker 2: Well, it will certainly a positive update from Tower, and 5 00:00:12,080 --> 00:00:15,040 Speaker 2: it was actually a third profit upgrade this year, which 6 00:00:15,080 --> 00:00:17,439 Speaker 2: is a big turnaround after losing money last year with 7 00:00:17,480 --> 00:00:20,520 Speaker 2: the weaber events. Now Tower has actually undergone a big 8 00:00:20,560 --> 00:00:23,919 Speaker 2: strategic turnaround in recent years which has helped them compete 9 00:00:23,960 --> 00:00:27,840 Speaker 2: with the much larger Australian owned insurance and has also 10 00:00:27,880 --> 00:00:31,639 Speaker 2: helped them improve their own profitability. I think it's also 11 00:00:31,640 --> 00:00:34,159 Speaker 2: fair to say that Tower has benefited from much higher 12 00:00:34,159 --> 00:00:37,120 Speaker 2: prices on the back of last year's events and also 13 00:00:37,200 --> 00:00:39,839 Speaker 2: a general reduction and insurance claims this year with much 14 00:00:39,880 --> 00:00:40,360 Speaker 2: better weather. 15 00:00:40,840 --> 00:00:43,479 Speaker 1: And so why have insurance costs gone up so much lately? 16 00:00:44,680 --> 00:00:46,599 Speaker 2: Well, they have gone up quite a lot, and I'm 17 00:00:46,600 --> 00:00:49,120 Speaker 2: sure anyone looking at their insurance policy renewal has had 18 00:00:49,120 --> 00:00:51,159 Speaker 2: a bit of a shock and it was actually a 19 00:00:51,159 --> 00:00:54,720 Speaker 2: standout in recent inflation data where motor and home insurance 20 00:00:54,760 --> 00:00:57,640 Speaker 2: has gone up by about twenty to thirty percent. Now 21 00:00:57,880 --> 00:01:01,400 Speaker 2: that's really been driven by three things. Firstly, New Zealand 22 00:01:01,400 --> 00:01:05,680 Speaker 2: reinsurance costs went up significantly last year after the Auckland 23 00:01:05,680 --> 00:01:09,280 Speaker 2: floods and cyclone, which costs the industry about four billion dollars, 24 00:01:09,920 --> 00:01:13,280 Speaker 2: and reinsurances where insurance insurance companies like Tower go and 25 00:01:13,280 --> 00:01:16,280 Speaker 2: get their own insurance for large events like floods. So 26 00:01:16,319 --> 00:01:18,919 Speaker 2: those costs have gone up a lot with these events 27 00:01:18,920 --> 00:01:22,199 Speaker 2: happening more frequently than the one to one hundred years 28 00:01:22,200 --> 00:01:25,199 Speaker 2: that a model would suggest. And then secondly, claim costs 29 00:01:25,240 --> 00:01:27,720 Speaker 2: have also gone up a lot, where modern cars are 30 00:01:27,720 --> 00:01:31,680 Speaker 2: getting more expensive to repair with all their sensors and technology, 31 00:01:32,200 --> 00:01:34,720 Speaker 2: and home repairs. Home repair costs have also gone up 32 00:01:34,720 --> 00:01:38,039 Speaker 2: with build inflation. And then I think finally, we've also 33 00:01:38,080 --> 00:01:42,080 Speaker 2: seen insurers sung to adopt more risk based pricing or 34 00:01:42,120 --> 00:01:45,200 Speaker 2: increasing prices for houses and flood zones or vehicles that 35 00:01:45,240 --> 00:01:49,920 Speaker 2: get stolen frequently such as the Toyota Aqua or Mesdademia. 36 00:01:50,120 --> 00:01:51,760 Speaker 1: Do you reckon that we're passed the peak in these 37 00:01:51,800 --> 00:01:53,600 Speaker 1: insurance costs or is there more to come? 38 00:01:54,480 --> 00:01:56,840 Speaker 2: Well? I think the good news is that the worst 39 00:01:56,960 --> 00:02:01,320 Speaker 2: has passed and these price increases really relate to events 40 00:02:01,400 --> 00:02:04,760 Speaker 2: last year, but take time to roll through as policies 41 00:02:04,760 --> 00:02:08,560 Speaker 2: for you. So I think looking ahead, cost inflation is easy, 42 00:02:09,120 --> 00:02:12,960 Speaker 2: reinsurance costs should stabilize without any more large events, and 43 00:02:13,000 --> 00:02:15,440 Speaker 2: that should all flow through to much lower but still 44 00:02:15,440 --> 00:02:19,040 Speaker 2: potentially high single digit low double digit price in cruises 45 00:02:19,120 --> 00:02:22,280 Speaker 2: next year. I also think it's worth mentioning that with 46 00:02:22,440 --> 00:02:25,560 Speaker 2: risk based pricing, it could also result in a wider 47 00:02:25,680 --> 00:02:29,960 Speaker 2: range and insurance costs between cars, houses and also between 48 00:02:30,000 --> 00:02:33,160 Speaker 2: insurance companies, so it is worth shopping around it and 49 00:02:33,200 --> 00:02:35,600 Speaker 2: looking at insurance costs when you are looking to purchase 50 00:02:35,639 --> 00:02:38,640 Speaker 2: a new car or home, and maybe just avoiding the 51 00:02:39,240 --> 00:02:42,160 Speaker 2: Toyota Aqua, which was New Zealand's most stolen car last year. 52 00:02:42,320 --> 00:02:44,000 Speaker 1: That's a good piece of advice, Michael. Thank you very 53 00:02:44,080 --> 00:02:48,280 Speaker 1: much appreciated. Michael Luke of Milfed Asset Management. For more 54 00:02:48,320 --> 00:02:51,640 Speaker 1: from Hither Duplessy Allen Drive, listen live to news talks. 55 00:02:51,680 --> 00:02:54,880 Speaker 1: It'd be from four pm weekdays, or follow the podcast 56 00:02:54,960 --> 00:02:55,919 Speaker 1: on iHeartRadio.