With the claims process underway, the long-term impacts of Cyclone Gabrielle and the Auckland Anniversary weekend floods are affecting brokers and their clients. As underwriters reevaluate their coverage and exposure in impacted areas, the long-term outlook and availability of insurance is only starting to be understood for both the domestic and business markets. 

Aotearoa New Zealand is no stranger to large-scale insurance events and the changes this causes in both the short and long-term insurance market, and the way brokers can serve their clients. Brokers are currently faced with the challenges of supporting clients while they navigate active claims and understand the response from underwriters. 

Cyclone Gabrielle and the Auckland flood events are the two biggest weather events in New Zealand history, occurring only weeks apart. “In terms of the scale of what insurers are dealing with, it is unprecedented,” says Sarah Knox, disaster response manager for the Insurance Council of New Zealand (ICNZ). Over 100,000 claims have been received in response to these two events, with a third of these settled, as of the start of June. 

With settlement progress comes the analysis of long-term underwriting changes to flood and weather-related events and what that means for insurance consumers. 

Central and local government decisions and actions are still to be finalised, which will also affect policy underwriting. Similar to the Christchurch and Canterbury earthquakes, land category allocations by local government bodies will impact policies and coverage long term. Much of this impact is only starting to be understood as local governments make decisions on land categories and what long-term plans will be to reduce future flood risk. 

With so many aspects still uncertain, Knox speaks highly of how local insurers and their teams have reacted so far to these events and the uncertainty in the market.

“Regardless of the scale, I think we're doing really well, and I'm really pleased with the progress so far given there's so many uncertainties with the land categorisations that the government and local councils have.”

Brokers have started to notice the changes impacting clients and their policies as underwriters reassess the risk profile of not only Auckland and Hawke’s Bay, but Aotearoa New Zealand as a whole. 

With climate change creating larger, more frequent weather events, our risk profile is changing. While earthquakes have always been a large risk factor for the country, more regular, large-scale loss caused by flooding and cyclones has not been as high on our risk profile. 

As Claire Holt, financial adviser from Share NZ explains, “they haven't had the chance to look at the modelling for floods or cyclones in this area very much. They’ve got a lot of data on earthquakes and liquefaction, and a lot of data on earthquakes, but in terms of modelling for flooding and cyclones in this area and New Zealand, they haven't got that data to work with”. 

With long-term data still being worked on, the initial response to the losses has driven price changes and, in some instances, created difficulties in gaining cover. 

Similar to what happened after the 2011 Christchurch earthquakes, insurers are acting with caution. “The market really has hardened at a huge rate. The last time I saw it increase at this rate was after the Christchurch earthquake,” says Holt.  

Brokers in both the domestic and business markets are noticing the price increases to consumers. Brokers are having to work harder in the current environment when communicating with clients. 

Holt further explains the difficulties faced by many: “It's been a tricky market. For us, we really just have to manage client expectations. So that's getting on the phone and speaking to a lot more clients and explaining what’s happening in the market.” 

Looking to the long term, Holt advises that ‘rate increases are going to be here to stay for a while yet”.

In the future, maintaining the scalability of resources within the insurance industry is also important to maintain client support during major events. Holt explains that looking after insurance teams’ wellbeing should also be part of response planning. 

“Wellbeing of the staff is really up there as well. That’s top of mind when we're looking at it all and managing these events as well.” 

As teams are working through the unprecedented number of claims and complex ongoing insurance issues that occur as a result of major events, everyone in the industry should be reviewing their own processes and how they contribute to the settlement process. 

“I think people are learning some lessons out of this,” says Holt, as companies evaluate their ongoing operations and how to best support their clients long term. As well as changes in underwriting in response to these extreme weather events, legislation changes to EQC Act have also come into effect. 

Coverage caps mean brokers and claims teams are dealing with claims that would have previously been referred to EQC. Brokers are more involved than in the past.

“Previously, people would just deal with EQC as a separate entity, and brokers wouldn't get so involved,” explains Holt. 

Brokers are now faced with the task of ensuring they are getting the best deal for their client, while making sure excesses fit within both the Act or the client’s policy when it is beyond the parameters of the Act. 

It’s been a challenge for staff to gain a full understanding of the changes, in the circumstances, but Holt says teams have risen to the challenge and continue to work hard, ensuring that clients are getting the right outcomes and their cover is responding in the right way. 

While Cyclone Gabrielle and the Auckland flood events have resulted in immediate changes to the local insurance market, with cost impacts and a conservative outlook for risk coverage, the longer-term impact is still somewhat unknown and reliant on the long-term data being collated and analysed. 

Brokers and ICNZ are aware of the impact this uncertainty can have on clients and their long-term decision-making. More than eight months after the worst weather in decades, many factors need to be accounted for so long-term strategic sustainable solutions can be offered to the market. 

Sept 2023