The Pinnacle
Issue 47 (December 2023)
Ready for a summer of change?
As we look forward to the Christmas break and New Year, many businesses are anticipating change, hopefully on the positive side. Recently, I was excited to announce a major change for our own business – our acquisition by the Howden Group which will provide us with a broader spectrum of resources and far more, I’m sure. But there have also been less positive changes in insurance which have created a perfect storm in insurance costs. In this issue of The Pinnacle, we look to unpack them, so you can understand the insurance landscape. We also highlight the increase in the FENZ Levy and the insurance industry’s concerns. We share some Delta Insurance white papers that cover risks from UAVs to medical malpractice, and we look at work-related disease and the potential fines for exposing workers to carcinogens – which is particularly current with the spotlight on engineered stone.
Finally, we enclose an exceptional wine offer from our Hawkes Bay client SHED 530. As you may know they were greatly affected by Cyclone Gabrielle, and we are pleased to have helped get them back on their feet. Please support them if you can.
As ever, Apex will be running a skeleton crew between 21 December and January 8 to help clients in emergencies during the holiday period.
In the meantime, enjoy the festive period with your families, stay safe, and read on.
Best regards, James.
Hello Howden
The Howden Group started with three friends in a tiny office in London back in 1994. Today they are the world’s largest non-American insurance broker with a truly international focus. Howden brings specialist risk advice in 40 countries, with 6500+ people ready to support clients.
Their network of trusted broker partners provides further access to local experts in over 90 territories worldwide – including New Zealand.
Shed five thirty wine offer
To support our client Shed Five Thirty Estate, we have an exclusive discount to Apex clients in time for Christmas. Since Cyclone Gabrielle, they have been busy rebuilding and your purchase will play a big role in helping them re-build their vineyards and cellar door.
Use the code Apex30 to receive an incredible discount off their range of wines all crafted at their Puketapu cellar door.
Surging insurance costs
The landscape of insurance costs is undergoing a noticeable transformation this year, and while inflation certainly plays a part, attributing the entire shift solely to inflation would be an oversimplification. Several factors, including weather patterns, global reinsurer adjustments, supply chain disruptions, regulatory modifications, and yes inflation, has culminated in a simultaneous impact on insurance expenses.
Elevated Drivers of Rising Insurance Costs
This year, the trend of insurance costs has been markedly upward, propelled by a multitude of factors, each bearing distinctive significance. Primarily, insurers are reassessing the rates associated with each type of insurance value. This recalibration is a response to several elements, namely:
Weather Extremes: 2023 marked an unprecedented year in terms of weather-induced events, with damage to properties, belongings, and vehicles resulting from leaks, floods, hailstorms, and landslides.
Global Reinsurer Dynamics: Overseas reinsurers, who shoulder a substantial portion (up to 80%) of New Zealand's claim expenses, are increasing their fee structures on a global scale, impacting insurance companies' financial obligations.
Supply Chain Challenges: Delays in acquiring replacement components for residences and vehicles are extending the duration of repairs, consequently escalating costs for insurers over prolonged timelines.
Operational Overheads: The operating costs for insurance companies have surged due to inflation, necessitating higher expenditures on personnel and facilities, mirroring the general trend across various sectors.
Geo-Caching Assessment: As data provides more information insurers are transitioning from suburb-level assessments to a more refined evaluation based on risk factors, such as proximity to sea level, susceptibility to soft ground, or adjacency to fault lines.
The Dynamics of Escalating Building Costs
A substantial contributor to escalating insurance expenses is the surging costs of construction in New Zealand, which have increased by approximately 20% within the last year. This demands higher sums insured in most cases, amplifying not only the rate per dollar of insured value but also extending this elevated rate to a larger sum insured quantum.
Beyond the Insurer's Ledger: Additional Cost Influences
The financial burden of insurance extends beyond the insurer's direct costs. The obligation to collect Fire and Emergency New Zealand (FENZ) Levies ($106 per dwelling and $106 per $100,000 for commercial property) and Earthquake Commission (EQC) levies constitutes a significant aspect. The government has increased the EQC levy from $300 to $480 per residence. This enhancement aims to bolster EQC's coverage for insurers from $150,000 to $300,000 per dwelling. However, for most homeowners, this adjustment, excluding a few regions like Wellington, translates to an additional rise in insurance expenses. FENZ Levies are going to increase again in July 2024.
Talk to your Account Director if you have any questions, queries, or concerns about your insurance program.
FENZ Levy fires insurance pain
Despite strong resistance from IBANZ, the government approved an 12.8% increase in the FENZ levy from July 2024. In May 2023 IBANZ strongly resisted any increase of the FENZ levy rate. Their main points, when recommending the status quo, were:
Increasing the FENZ levy will have a significant impact on households and businesses; affordability of insurance will diminish;
Justification for a levy increase is poor considering there does not appear to be any financial measurement of efficiencies at FENZ;
the number of management and support staff at FENZ has increased 63.4% since 2016 while number of career fighters has increased by only 1.8%; and
FENZ does not model 60% of the levy revenue it receives (in other words, FENZ doesn’t know exactly what impact the 12.8% levy increase will have on businesses).
In-spite of these objections the government has approved FENZ’s request to increase the levy by 12.8% in July 2024.
Delta whitepapers
Delta Insurance has published a set of seven white papers in their thought leadership series, covering topics from Emerging risks from UAVs, New risks from new technologies, Protecting your IP, Embracing Environmental Risk Management, The Evolution of Cyber threats, Food Safety Risk Management, and Healthcare Risk Management. If your business is involved in any of these areas, we recommend you download the whitepaper and share amongst your team. The more you know, the better.
Work related diseases
We almost always focus on the “safety” in “health and safety”. But diseases caused by work are much more likely to kill workers than accidents. In the latest Safeside by Vero liability, they published new research that highlights workers’ exposure to carcinogens in New Zealand workplaces.
Work-related disease is estimated to account for 750-900 deaths a year in New Zealand. Cancer contributes to about half of those deaths and at least a third of work-related hospitalisations.
A recent survey found that over half (57.5%) of workers in New Zealand are probably exposed to at least one cancer-causing agent or carcinogen at work. Almost a quarter of workers (23.3%) are probably exposed to five or more carcinogens. And nearly three in ten workers (28%) are probably exposed to at least one carcinogen at a high level of exposure. The three industry sectors with the highest exposure to at least one carcinogen were Mining (97%), Electricity, Gas, Water and Waste Services (92.7%), Agriculture, Forestry and Fishing (88.9%).
The New Zealand Carcinogens Survey (NZCS), commissioned by WorkSafe New Zealand, was the first research to examine the prevalence of occupational carcinogens in the working population. It found that the five most common cancer-causing substances and exposures across all industries were benzene (30%), solar UV (27%), UV exposure to the eye (26%), diesel engine exhaust (24%), and second-hand tobacco smoke (15%). Two lesser-known carcinogens, shift work and wood dust, accounted for 9% and 8% of exposures respectively.
Construction workers, farmers, and emergency workers experienced the highest average number of exposures, with each group exposed to more than seven carcinogenic agents. At medium and high levels of exposure, shift work was the most common carcinogen in Healthcare and Social Assistance, and Public Administration and Safety (17.5% and 12.3%, respectively). Māori and Pacific workers and men were the most likely to be exposed to at least one carcinogen.
You can read more about identifying and managing the risks of carcinogens on WorkSafe’s website. You can also find a useful discussion about the NZCS in The Conversation.
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