John MacDonald: The absurdity of our insurance market

If this doesn’t convince you that the insurance system in this country is broken, nothing will.

Consumer NZ has revealed that in the past 25 years, the cost of insurance has increased by 900%. The largest increase of anything in the Consumer Price Index. 

If you’ve bought insurance of any type in the past, maybe that won’t surprise you. Because insurance is a necessary evil and with necessary evils, we tend to shrug our shoulders and fork out the money.

But here’s what makes this news all the more outrageous – and this is the bit that you really need to get your head around.

Insurance is 900% more expensive than it was, while cigarettes and tobacco are 600% more expensive – even with the huge taxes that have been put on them to try and get people to quit smoking.

Despite all those taxes, insurance costs are still increasing at a much faster rate than tobacco. Which is the absurdity and shows how the insurance market is out of control.

Rebecca Styles from Consumer NZ is saying today that they want a review done of house and contents insurance prices to make sure they’re fair. I think I can tell her straight away that they’re not. 

Consumer NZ also wants the Government to develop a switching platform to make it easier for us to change insurance companies, like we can do already with electricity companies.

It says people have limited ability to change their insurers.

But changing insurance companies is one thing, whether you can afford the premiums is another. Rebecca Styles says some people are just dropping it altogether.

"The anecdotal feedback we've received is people are making what seem like extreme pragmatic decisions - 'oh my mortgage is paid off, well I'll drop my insurance as soon as that's done'.” 

She says: “I ask them, 'what will you do if there's a natural hazard or something, you're not covering for that … they're like 'oh well I'll live in a caravan'. Taking big risks with their financial future, really."

Are they ever? Reducing insurance cover or getting rid of it altogether would be the absolute last thing I would do.

But that doesn’t mean I’m happy paying exorbitant prices and that doesn’t mean I think the insurance system is in great shape.

Because it clearly isn’t.

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Episode Transcript

Speaker 1 (00:06):
You're listening to the Canterbury Morning's Podcast with John McDonald
from Newstalk ZB.

Speaker 2 (00:12):
If you still need convincing that the insurance system in
this country is broken, well, if this doesn't convince you,
I reckon nothing will. I'll be surprised if it doesn't,
you know, never know. Either way, I'm convinced that it is.
So what's happened? What has happened? Consumer NZ has revealed

(00:34):
today that in the past twenty five years, the cost
of insurance has increased by nine hundred percent, which is
the largest increase of anything in the Consumer Price Index anything. Now,
if you've bought insurance of any type in the past
or recently, maybe that won't surprise you, because insurance it's

(00:57):
a necessory or a necessary evil, isn't it. And with
necessary evils we tend to show our shoulders and fork
out the money and think of okay, all right, God,
too much about that, although you do hear it, dont
you about some people starting to question how necessary and
evil it actually is. But we'll get to that in
a second. So, while this massive increase in insurance costs

(01:21):
might not be something that has just spilling your coffee
or your tea this morning, you still might want to
put your cup down. Why is that, well, because here's
what makes this news today from Consumer ENZ all the
more what's the word to use, all the more outrageous.
Actually it's outrageous. And this is the bit that you
really need to get your head around. And this is

(01:43):
the bit that proves to me at least, that our
insurance system is broken. So insurance it's nine hundred percent
more expensive than it was. Cigarettes and tobacco are six
hundred percent more expensive. So that cigarettes and tobacco six

(02:03):
hundred percent more expensive, even with the huge taxes have
been put on them to try and get people to
quit smoking. Just let that sink in. Despite all those taxes,
insurance costs are still increasing at a much faster rate
than tobacco. Which is the absurdity, and which is why

(02:26):
the only conclusion that I can come to. Maybe it's
the only conclusion you can come to, but for me anyway,
just tells me that the insurance market is out of control. Now.
Rebecca Styles from Consumer en Z are saying today that
they want to see a review done of house and
contents insurance prices to make sure that they're fair. I
think we can tell us straight away, can't we that

(02:48):
they're not, especially when you consider that what we're paying
here for insurance is more than what they pay in Australia.
Something else Consumer end Z wants is the government to
develop a switching platform to make it easier for us
to change insurance companies like we can do already with
electricity companies, because it says people have limited ability to

(03:09):
change their insurers. Apparently it's more difficult to do here
in Canterbury than it is in places like Aucklands. You
might have some stories to share on that front, but
changing insurance companies is one thing. Whether you can afford
the premiums it's another a it's a whole different story.
And Rebecca styles from Consumer and Z. She says today
that some people are just dropping it all together. She says,

(03:32):
quote the anecdotal evidence were received as people are making
what seems like extreme pragmatic decisions. They're saying, oh, my
mortgage is paid off, Well, I'll drop my insurance as
soon as that's done. And she says, I ask them,
I ask them, I say to them, what will you
do if there's a natural hazard or something you're not
covering for that, and these people tell her, well, I'll

(03:55):
live in a caravan, and quite rightly, she says, these
people are taking big risks with their financial future, are
they ever? And look, I've got to say regis using
insurance cover or getting rid of it altogether, would be
the absolute last thing I would do. But that doesn't
mean I'm happy paying the exorbitant prices, and it doesn't

(04:18):
mean that I think the insurance system is in great shape,
because it's not. It's not in great shape. It's broken.

Speaker 1 (04:26):
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