Kris Faafoi: Insurance Council CEO on the likely increase to the home insurance levy

The Insurance Council's highlighting the tough balancing act facing the Government, over the Natural Hazard Commission insurance fund shortfall.  

The Government is signalling a home insurance levy increase to help bolster the Commission's kitty.  

Cabinet is set to decide on the changes in the coming months.  

Insurance Council Chief Executive Kris Faafoi told Mike Hosking it's a tricky task when money is tight.  

Faafoi says funds are necessary, as the commission provides the first payout, but increases will be tough given the current cost of living.  

Levies could increase between $200 and $300 a year.  

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Episode Transcript

Speaker 1 (00:00):
It's not like we didn't warn you. We've got more

(00:01):
insurance increases coming our way. The government has a shortfall
at the Natural Hazards Commission, which once upon a time
is called the EQC. At this stage it looks like
we're going to be paying another two hundred dollars per
year per household.

Speaker 2 (00:11):
No.

Speaker 1 (00:11):
Chris Farvoy is the boss of the insurance counsel and
is back with us. Chris, morning to you.

Speaker 2 (00:16):
Good morning, Mikee.

Speaker 1 (00:16):
So this isn't really your fault, is it.

Speaker 2 (00:19):
No, it's not, but it is necessary and I think
you know we've in the herod this morning. Ministerine was
I think trying to strike the right balance of making
sure that the Natural Hazards Commission has got enough money
in the catty there. But also I think he's aware
of the cost of learning pressures on consumers and how
people feel about that when it comes to their insurance premium.
So you know, it's one of those things we need

(00:41):
to make sure it does have money in it because
it's the first one to pay out, the Natural Hazards Commission.
But at the same time people are finding things difficult
at the moment.

Speaker 1 (00:51):
Does it make it easier for you because the more
they pay out, the less we tap.

Speaker 2 (00:54):
You look that they were always going to pay out
a said amount, and so you know, making sure that
they've got enough money to pay that is obviously important.
If they didn't then to afford on the government, so
taxpayers would put the bill anyway. But before private insurance
companies can pay out, the Natural Hazard Commission has to
pay out, so really in the way that that the

(01:16):
market is structured, that's really important. I think that the
thing here is obviously the impact on consumers themselves, and
from our perspective, when prices of premiums go up, people
have to make some difficult decisions sometimes, so we want
to make sure that people maintain the appropriate level of
insurance cover for them because I think the last thing
we want to have is people under insurance, so not

(01:39):
having enough insurance to replace what they've got, but you know,
and the worst case scenario having no insurance at all,
so that would make pretty difficult for.

Speaker 1 (01:47):
The worst and New South Wales very closely where you're
looking at areas we're now in Australia where you can
get insurance but at forty five thousand dollars for a
premium per year, no one can afford it. Obviously, how
close to that are we here in certain parts of
the country.

Speaker 2 (02:02):
Look, I think if we look at risks across the board,
if we don't do things to reduce the risk over
time because of what we're expecting, whether obviously seismic has
always been there, then insurance are going to be a
tougher ask. So one of the big things that we've
pushing for is what are we doing to make sure
that we're doing as much as we can to reduce
the risk of flooding For some areas which are highly

(02:24):
likely to be flooded more regularly and more severely, we've
had a big wake up call a couple of years ago.
So a big push from us is what are we
doing to get ahead of this? What infrastructure can we build?
Obviously prior signals are there as well, how we build planning.
You know, we've got to stop building and done places
if we know they're going to flood regularly, then they'd
stop doing that.

Speaker 1 (02:44):
But that's the problem, isn't it? In places we are
still building, and that brings you it's too convoluted because
you've got you guys and insurance, you've got the central government,
and then you've got local government of course, and they
do something and you go, we'll hold on. That's no
good and central government goes, no, we shouldn't do that,
and next thing, you know, all you do is sending
me a bill.

Speaker 2 (03:00):
Yeah, there's some lot at the end of the tunel.
The government's looking at some work being led by a
climate change of Minister Simon Watts. We've been party to that.
The banks and local government have been part of that.
One of the big things there, hopefully is some reform
of how we plan and decitisens we're making about land
you so we don't make things worse. I think we've
had generations of building and places where probably haven't been

(03:21):
that smart, and we've got the science now and the
ability to do something about it, so I hopefully we
can get out head of it because at the moment,
on the current settings, we're just doing what we've done
and making things worse. And at the end of the day,
you know, there's big payouts from private insurance companies and
governments to compensate where these things are happening.

Speaker 1 (03:39):
Good on you, mate, nice to catch up, appreciate it.
Chris Barfoy, CEO Insurance Council of New Zealand.

Speaker 2 (03:44):
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