The Pinnacle
Issue 43 (March 2023)
Getting through the rising costs
As we emerge from what has possibly been the worst summer in living memory – for the North Island at least, it’s clear that major changes in building, infrastructure and insurance are on the horizon. In this first issue of Pinnacle in 2023, we look at what’s affecting commercial premiums, how to spread the cost of premiums, the benefits of being with a broker and how we ensure compliance, and finally we look at the dangers of remote working. There’s a lot to take in, so grab a coffee.
Committed to compliance
As your trusted insurance broker in New Zealand, we want to assure you that we are committed to complying with all relevant regulations and requirements.
Our goal is to provide you with the best possible insurance solutions while ensuring that we operate in a transparent, ethical, and compliant manner. Here are some of the ways that we ensure compliance:
Licensing and registration: Our team of brokers is licensed and registered with the New Zealand Financial Markets Authority (FMA). This means that we have met the FMA's requirements for education, training, and experience in the insurance industry.
Compliance policies and procedures: We have established compliance policies and procedures to ensure that our business operations are conducted in accordance with all relevant laws, regulations, and industry standards. These policies and procedures cover areas such as privacy, data protection, anti-money laundering, and counter-terrorism financing.
Ongoing training and development: Our brokers participate in ongoing training and development programs to stay up to date with the latest changes in the insurance industry and regulatory environment. This helps us to provide you with the most current and relevant insurance solutions.
Regular compliance reviews: We conduct regular compliance reviews to ensure that our policies and procedures are effective and up to date. These reviews are conducted by our internal compliance team and may also involve external auditors or regulatory bodies.
At Apex, we take our role as your insurance broker seriously, and we are committed to providing you with the highest level of service and compliance. If you have any questions about our compliance practices, please do not hesitate to contact us.
What’s impacting commercial property premiums?
Commercial property premiums in New Zealand are being impacted by several factors this year. One of the significant drivers of premium increases is the rising costs of building construction and equipment.
This is due to a high demand and insufficient supply, leading to an increase in building supply costs, particularly imported goods. Construction labour rates have also risen by 28% in New Zealand since 2019. Furthermore, the insurance industry has experienced multiple large fire losses over the past 12-18 months, leading to rate adjustments to ensure risks are being insured at the right price.
Reinsurance costs also impact the price of insurance as weather events globally increase, leading to higher insured losses. For instance, Hurricane Ian, that swept through Florida in September 2022, was the costliest weather event, costing the global insurance industry an estimated $65 billion (USD). This has resulted in the hardest ‘property catastrophe reinsurance market’ in a generation, leading to increased reinsurance costs that are reflected in customers' premiums this year.
Underinsurance is another factor impacting commercial property premiums as businesses may not have adequate insurance in place, leading to higher costs of replacing stock, machinery, and specialist equipment. For instance, one customer's business had grown significantly over the years, but their business insurance cover had never been adjusted. After a review, their cover was increased from $400k to $2,000,000.
Businesses are also experiencing major delays on construction projects due to supply chain issues and sourcing materials. This has a direct impact on reinstatement timeframes, leading to an increased risk of business interruption. As such, businesses should be reviewing their business interruption indemnity periods to ensure they are adequate.
Overall, several factors are driving commercial property premium increases in New Zealand, including rising building costs, large fire losses, increasing reinsurance costs, underinsurance, and supply chain issues leading to business interruption. It is crucial for businesses to review their insurance coverage regularly to ensure they are adequately covered.
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Why a broker is better
As a client, you may be wondering whether it is better to purchase insurance directly from an insurance company or to work with an insurance broker. While both options have their benefits, in this article we will explain why using an insurance broker can be advantageous for you. First, let's define what an insurance broker is.
An insurance broker is a licensed professional who works on behalf of clients to help them find and purchase insurance policies. Brokers do not work for insurance companies; instead, they work for their clients to help them navigate the complex world of insurance and find policies that meet their unique needs.
Now, let's explore the benefits of using an insurance broker over a direct insurance company:
Expertise and advice: Insurance brokers are experts in the insurance industry, and they can provide you with valuable advice and guidance when it comes to selecting insurance policies. They can help you understand the coverage options available, assess your risk exposure, and recommend policies that best meet your needs. Brokers also have a deep understanding of the insurance market, and they can help you find policies that offer the best value for your money.
Choice and flexibility: When you work with an insurance broker, you have access to a wide range of insurance policies from multiple insurance companies. This gives you greater choice and flexibility when it comes to selecting insurance policies that best meet your needs. Brokers can also help you customize your policies to ensure that they meet your specific requirements.
Cost savings: Insurance brokers can help you find insurance policies that offer the best value for your money. They can also negotiate with insurance companies on your behalf to secure lower premiums and better terms. In many cases, the cost savings you can achieve by using an insurance broker can offset the broker's fee, making their services a cost-effective option.
Claims assistance: One of the most significant benefits of using an insurance broker is that they can assist you with the claims process. Brokers can help you navigate the claims process, communicate with the insurance company on your behalf, and ensure that you receive a fair and timely settlement. This can be particularly valuable if you have a complex or high-value claim.
Risk management: Insurance brokers can also help you manage your risk exposure by providing you with risk assessment and management services. They can help you identify potential risks and recommend strategies to mitigate them. This can help you reduce your risk exposure and minimize the likelihood of insurance claims.
Time savings: Purchasing insurance can be a time-consuming and complex process. When you work with an insurance broker, they handle the entire process for you, from researching and recommending policies to negotiating with insurance companies and managing the claims process. This frees up your time to focus on other important tasks.
In summary: Using an insurance broker offers several benefits over purchasing insurance directly from an insurance company. Brokers can provide you with expert advice, choice and flexibility, cost savings, claims assistance, risk management, and time savings. If you are looking to purchase insurance, consider working with an insurance broker to help you find policies that meet your unique needs and provide you with the best value for your money.
Spreading your premiums
Premium funding is a payment solution that allows clients to pay their insurance premiums in manageable instalments over time, rather than paying a lump sum upfront. So what are the advantages of premium funding?
Improved cash flow: One of the most significant benefits of premium funding is improved cash flow. Paying premiums in manageable instalments can help you avoid the financial strain of paying a lump sum upfront. Your business can manage its finances better, ensuring you have enough money for other essential expenses.
More financial flexibility: With premium funding, you can retain your cash reserves for other business or personal needs, such as investing in your business, making home improvements, or planning for retirement. This is especially helpful for businesses with fluctuating cash flows or individuals with unexpected expenses.
No need for security: Unlike traditional loans, premium funding does not require any security or collateral. This means you can take out a loan without putting your assets at risk.
Competitive interest rates: Premium funding offers competitive interest rates compared to traditional loan providers. Businesses can get better terms and rates, reducing the cost of borrowing.
Easy to manage: Premium funding is easy to manage, with straightforward payment plans you can budget for. This reduces the likelihood of missed or late payments, which can result in penalties and other fees.
If you want to know more about premium funding talk to your Apex broker today.
Keeping an eye on field staff
A forestry servicing company was recently ordered to pay more than $500k after a field technician died. The 48-year-old victim was fatally crushed at Quail Ridge Forest in Putere, near Wairoa, in November 2020 after the mechanical attachment he was working on was activated. Click to read.
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Disclaimer
This publication has been prepared for your general information. While all care has been taken in the preparation of this publication, no warranty is given as to the accuracy of the information and no responsibility is taken for any errors or omissions.
This publication does not constitute financial or insurance, or home loan product advice. It may not be relevant to individual circumstances. Nothing in this publication is, or should be taken as, an offer, invitation, or recommendation to buy, sell, or retain any insurance product or make any deposit with any person. You should seek professional advice before taking any action in relation to the matters dealt within this publication.
No part of this publication may be reproduced without prior written permission from our company. A disclosure statement is available on request and free of charge.