Kris Faafoi: Insurance Council Chief Executive on insurance rising 900 percent over the last 25 years

New data from Consumer NZ reveals insurance costs have soared over the last two decades, and there's concerns less households could access it going forward.

The report notes the cost of insurance has gone up 916 percent since 2000 - ahead of the increase in the price of cigarettes and tobacco, which went up 608 percent.

Insurance Council Chief Executive Kris Faafoi says there's been many high-profile disasters over that timeframe, which have helped drive up premiums.

"Inflation affects us too - when it costs more for building costs, then rebuilding a house ends up being more expensive."

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Episode Transcript

Speaker 1 (00:00):
Heller dup to see.

Speaker 2 (00:01):
Allen, it's happened.

Speaker 3 (00:08):
Thank god it happened, though, Am I right? FAM's god
it happened. We'll talk of it because I just who
wanted to sit around and wondering when it was going
to happen. We'll talk about that later anyway. Nine two
ninety two is the text number. Now Consumer has revealed
that insurance is the household bill that's gone up the
most in the past twenty five years. Get a load
of this. Insurance costs have gone up on average more

(00:29):
than nine hundred percent since the year two thousand. Basically,
everything is obviously more expensive than it wasn't two thousand,
but nine hundred percent is a massive jump. I mean,
the increase for Siggi's over that period is about six
hundred percent. Chris Fafoy is Insurance Council Chief Executive and
with us.

Speaker 1 (00:44):
Now, hey, farf Hey the hell are you?

Speaker 3 (00:46):
I'm very well, thank you? So why has it got
so much more expensive? Is it that there is a
legitimate reason or are you guys being greedy.

Speaker 2 (00:53):
It's been a pretty busy quarter of a century out
of that period of time here, so you know, we've
had christ Church we've had Co Coda. More recently, we've
had the North Island with their events with Auckland floods
and Soyco and Gabrielle, all of those pretty major events,
billion dollar events. And as a reserve bank said last May,
when they track these things, when these big events happen,

(01:15):
you usually see an increase in and reinsurance costs and
insurance premiums. And obviously with you know, inflation affects us too.
When it costs more for building costs than kind of
rebuilding a house ends up being more expensive. So fair
they have come off the heat a little bit in

(01:35):
the short term, and hopefully, because we'll obviously know that
people are feeling the punch at the moment, hopefully we'll
see some softening of those increases.

Speaker 3 (01:44):
So does that mean it's going to get less expensive
or just stop stop growing at the RTED.

Speaker 2 (01:49):
Is its sertainly stopped growing out the right as. I
think the steps that came out showed that inflation is
coming back.

Speaker 3 (01:55):
I understand the natural disaster stuff and that's fair enough.
But what about car car insurance increases and medical insurance increases, Well.

Speaker 2 (02:03):
We don't look after medical. That's another outfit but you know,
car insurance is a good example where it has come
off the heat heather to the year. Of March of
this year, inflation around cars was about close to eight percent.
It's kind of backed off in June to close to
two percent. So, as I said, we're starting to see
things soften up.

Speaker 3 (02:21):
So apparently about seventeen percent of people in one year
said they got rid of insurance because it was just
too expensive. Is there a point at which you guys
acknowledge that the prices cannot keep going up or we
will all start bailing out?

Speaker 1 (02:36):
Yeah.

Speaker 2 (02:36):
Look, I've questioned that number from consumersis and I know
I've done their survey, but that's not what our tracking
that we've been doing for some time has been showing,
especially around house insurance. Things like house and contents insurance
have been a challenge, and I think that's been the way.

Speaker 1 (02:51):
That people have tried to pull back.

Speaker 2 (02:54):
But we're weary of, you know, insurance premiums being a
challenge for ever run at the moment, given the cost
of living challenges, and again to Consumer New Zealand's points,
which we agree on substantively, the longer term challenge around
reducing risk for New Zealand has to happen a to
protect people from flooding that you know your listeners would

(03:15):
have experienced a couple of years ago. If we don't
do something about that, then yes, you are right, insurance
will become a challenge. We've been talking to the government
for some time about how do we make sure that
we are building better protections, having some hard discussions how
do we fund these things. Because we can have reduced
the impact of things like floods like we saw a
couple of years ago, then we'll be able to keep
insurance accessible for New Zealanders.

Speaker 3 (03:37):
Yeah, did you hear? You might have seen this yesterday.
We talked about it on the show. Belinda Story, who
does a lot of research. Economists, who does a lot
of research around climate risk and stuff, reckons that houses
near water or with water views are about thirty to
forty percent overpriced. What do you think, Look.

Speaker 1 (03:53):
I haven't seen that research.

Speaker 2 (03:55):
I know that where there are areas of higher natural
hazard risk like flooding and landslip, that there are going
to be some challenges for those communities in the future,
and we can actually maintain the value of those houses
in some of those areas if we build better protections,
and that's the long term challenge for New Zealand. There
will be more storms, there will be more floods. You know,

(04:19):
we report out a couple of weeks ago said there's
going to be thirty percent more rain than in these storms,
and we've kind of experienced in the past, so I
think most New Zealanders wouldn't want to make.

Speaker 1 (04:28):
Sure that we're getting ahead of that.

Speaker 2 (04:29):
So we do agree with consumers in New Zealand's point
in their report, it says the central government needs to
kind of grip this up a bit. I mean, the
banking sector, the insurance sector, councils have been calling for
some action around risk reduction for some time, and we
spent a hell of a lot of money responding to events,
and I think we could do better by making sure
we build some protections to reduce the impact. You know,

(04:53):
we jumped into the Takapuna golf course and debated a
month or so ago because we thought it was the
right thing to say. Actually, there's lots of fair and
businesses around there that could do with not getting flooded again.

Speaker 3 (05:03):
Yeah too, right, fav. Thank you for your tom. Always
appreciate it. This Chris Faffway, the Insurance Council Chief Executive.

Speaker 2 (05:09):
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