NZI boss Travis Atkinson has revealed what’s prompted recent rate increases in personal lines at NZI.
Atkinson said the cost of settling motor claims was increasing for both private and commercial motor vehicles, which he believed was unrelated to the current competitive market.
“Put simply, repair costs and motor parts prices are on the up,” he said, adding that the trend was also being seen in the USA, UK and Australia too.
“Frequency of claims is also on the increase, particularly in certain segments, but this is being overshadowed by the level of inflation around claims costs.
“In fact, we’ve experienced an increase over the last eight months which we haven’t seen in recent years.”
A big factor in this was the impact that newer motor vehicles were having on repair costs.
Firstly, there were many more new vehicles on the roads due to the fact that in many cases it costs no more to buy a new vehicle now than it did 10 years ago.
Secondly, average repair costs for these vehicles are much higher than for older vehicles, with the main reason being the presence of in-vehicle technology.
“I think we can all relate to vehicle damage as common as a mirror being knocked off a vehicle.”
But, he said: “The days of a quick fix that could be remedied pretty cheaply have passed.
“Today, if you knock a mirror off, that mirror is also adjustable, has a blind spot warning indicator and a light, and the cost is more likely to be in the vicinity of $1,000.”
He referred to his own personal experience of this: “It was close to $1,500 just to fix a scrape and replace the light on the back bumper of my car. And yes, it was my fault!
“The contradiction of course is that some of this new technology means improved vehicle safety features and will very likely reduce claims frequency in the longer term – something not lost on
IAG as we increasingly look to the future and focus on keeping motor insurance relevant in these changing times.”
One plus was as the economy was currently doing well, new vehicle sales in New Zealand rose to an all-time high in May, meaning insurers had the opportunity to insure more vehicles.
Atkinson said the company’s procurement team were also able to achieve an economy of scale and keep costs down to some extent through purchasing on behalf of all the IAG brands.
However, he said: “While we do our very best to achieve a balance, rate increases are inevitable and our recent announcement about NZI Personal Lines increases has been a direct reflection of the dynamics at play.”
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