A report from the Global Federation of Insurance Associations (GFIA) has identified and quantified the most significant and growing annual global insurance protection gaps. Of these, two are of particular concern for Aotearoa New Zealand, pertaining to the area of general insurance.
According to the GFIA report, shortfalls in insurance cover are in the area of US$900 billion for cyber risks and around US$100 billion for natural disasters. The latter in particular is well worth noting, as the country was very recently ravaged by two extreme weather events that resulted in severe economic losses, not only for New Zealanders but for the insurance market as well.
GFIA vice president and Insurance Council of New Zealand Te Kāhui Inihua o Aotearoa (ICNZ) chief executive Tim Grafton highlighted the areas of cyber risks and natural disasters as the most concerning for the country, as the two combined are liable for around US$1 trillion in cover shortfalls.
“Cybersecurity is often poorly understood and inadequately implemented outside of providers of crucial physical and economic infrastructure. It is a particular issue for an economy like ours that is characterised by a very large proportion of small and medium-sized enterprises who can lack the capacity to deal with the issue,” Grafton said in a press release. “Education is essential, as, too, are incentives, including in the form of premium discounts for taking sensible steps to reduce the risks.”
Grafton said that the issue New Zealanders face is one of protecting the country’s position as a global leader in this field.
“Central to preserving this is getting much smarter about where we build and maintain our homes, businesses and infrastructure while taking action to reduce risks so that insurance can remain both available and relatively affordable, on an all-risks basis, to property owners and insurers alike. What we mustn’t do is subsidise people to stay in harm’s way,” Grafton said.
GFIA president Susan Neely also weighed in on the report, saying that as insurers around the world play a vital role in helping to protect people and businesses from the risks they face, and ultimately provide cover when those risks materialise, the industry also needs to be aware of the range of factors that have led to huge and growing global protection gaps that could have profound impacts on people’s lives and livelihoods.
“Insurers can, and are, taking steps to address these gaps. These include using technology to assess risks and claims, and to make insurance more accessible for people and businesses. However, closing the gaps will also require action from policymakers to create environments in which risks can be managed and mitigated,” Neely said.
In the aftermath of the two extreme weather events hitting Aotearoa and subsequent end of state of national emergencies in a few remaining areas, a national transition period has been announced in order to provide local Civil Defence teams with the powers that may be necessary during the early recovery stages, including road clearing and dangerous materials disposal.
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