Rising costs in New Zealand are having a significant impact on New Zealanders’ lives, as well as on our business operations. On top of general cost of living increases, we have also been experiencing cost increases specific to our industry that have impacted our operations.
The premium you pay can be influenced by a range of factors, including your location, the materials used to construct your home, your sum insured, when your home was built, the number and types of claims we receive and more. Another portion of your premium goes towards taxes and levies that we collect on behalf of Government agencies.
Part of the premium we charge also goes towards paying our own insurance premium for reinsurance. This is additional cover we purchase to protect us against large scale or extreme events such as storms, floods and earthquakes. Recently, increasing reinsurance costs have impacted premiums across the insurance industry. This has been influenced by the significant number of claims we received this past year due to extreme weather events, including the North Island floods and Cyclone Gabrielle. As a result of these types of events, and even past events such as earthquakes, reinsurers are changing how they view New Zealand and the costs being charged to insurers, which means AA Insurance’s reinsurance costs have increased significantly.
We strive to keep premiums as competitive as possible, however, many of our costs relate to factors beyond our control, especially the number and cost of claims we receive. Factors including increased labour costs, rising costs of construction materials and fuel all have an impact on the final cost of claims. This means that each year your premium can change, even if your personal circumstances haven’t.