Insurers must be more flexible - KPMG

CATHERINE HARRIS

The insurance industry is adjusting well to the post-Christchurch earthquake environment but will have to be more flexible to ensure customers can afford insurance, professional services firm KPMG says.

The company's annual update of the insurance industry said claims in the year to June 30 decreased, thanks to a year with no major earthquakes or other major events.

However, two "events of note", April's Nelson/Bay of Plenty storms and floods and the nationwide storms in June, cost the industry an estimated $36 million and $34m respectively.

After a couple of tough years, the insurance industry performed well in 2013, with a 4 per cent increase in gross written premiums, totalling $4.64 billion across all types of policies.

Net earned premiums increased 7 per cent, a figure affected by both premium price hikes and an increase in new clients.

The total number of claims fell 2 per cent to 1,007,387, and gross claims incurred - the total amount insurers paid out, including reimbursements from reinsurers - dropped 34 per cent on the previous year.

Excluding reinsurance paybacks, net claims incurred fell 4 per cent to $2.12b.

KPMG senior manager Jamie Munro said the fall in claims was due partly to a tapering off of claims associated with the Canterbury earthquakes.

Insurers had been making good inroads there.

"They now have an increased understanding on the factors impacting settlements, as well as clarity from court cases coming through."

However, the report warned that several years of rising premiums meant insurers would have to design products that were more flexible to their customers needs, particularly with regard to affordability.

"We are already seeing insurers introduce more flexibility in excesses on property cover, in an effort to make insurance more affordable to customers," it said.

A big change for the industry during the year had been the swing from open-ended replacement cover of property to "sum insured," which put a limit on the value insurers needed to pay.

Munro said most in the industry had moved this way as global reinsurers were unwilling to take on unquantified cover.

"It has pushed the onus back on the insured to understanding the value of their property - and what is and isn't included - when deciding on the sum insured value."




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