In an interview with CoverNote that occurred against a backdrop of a state of emergency in Christchurch, Wellington battling wind gusts of up to 150kmph and the MetService issuing a rare red weather warning, Minister Seymour outlined his priorities for regulatory reform, risk-based pricing, and the need for greater public understanding of insurance coverage as New Zealand faces escalating natural hazard risks.
Asked about the biggest issues facing the insurance industry Minister Seymour, who is also the minister in charge of the Natural Hazards Commission, cited the volume of assets in New Zealand exposed to real danger, the rising cost of reinsurance and the inherent conflict between building in dangerous places and other people “carrying the can.”
Regulatory review on the horizon
Minister Seymour noted that a regulatory review of the financial sector is a key part of the coalition agreement, with insurance included as part of the focus. The review is expected to be announced in the second half of 2025, following a series of sector reviews across government.
“We are now announcing a sector review every quarter, and the shape of a financial sector review and the timing of it aren’t certain yet, but they’re getting more certain,” he said.
Minister Seymour indicated that while he believes there are some areas where the government can help, its first role is to listen.
“We’re certainly interested in the regulatory burdens that insurance faces. What we do hear across the financial services sector is that people are very frustrated.” He said it makes sense to let people answer the question of what most needs to be tackled from a regulatory point of view.
He pointed to reviews undertaken in other sectors such as early childhood, hairdressing and agricultural and horticultural product registration, saying, “We didn't know at the beginning, what the concerns of the regulated parties were, but we certainly do now, and we've been able to propose a regime of fixes that I believe are going to really liberate those sectors.
“Insurance is one of those areas where people are concerned about costs, and we can't change the underlying driver of costs, which is risk, but we may be able to change some of the regulatory concerns that make it harder for people to do this job.”
Natural Hazards Insurance Act, risk signalling, and consumer awareness
CoverNote recently aired the concerns of the Insurance Brokers Association of New Zealand (IBANZ) about the Natural Hazards Commission’s (NHC) discretionary power to decline cover where a Natural Hazard Section Notice is recorded on a property title. IBANZ is concerned that the impact of section notices on insurance cover is not sufficiently understood.
NHC has the power to fully or partly decline a claim for damage caused by the same type of hazard specified in the section notice. This can also impact the above cap portion of cover, as some private insurers will only pay out once the NHC accepts its portion of the claim.
When CoverNote raised the issue with Minister Seymour, he pointed to the important role brokers play in ensuring consumers fully understand their cover. “I think it's one of the critical functions of brokers in our society to make sure that people do understand their insurance. You either move to absolutely universal, indiscriminate coverage, or you make sure that people are aware of what they’re signing.”
From a broader perspective, he expressed a strong preference for sending clear signals to property owners. “If you go to indiscriminate coverage, what you’re really saying is that we’re going to continue subsidising people to build in places that are more dangerous. If you do that, then people who are weighing up the value of a property versus the safety of a property, are having their choice distorted by a mandatory government programme.
“I don’t think it’s right for the government to distort people’s decisions towards living in more dangerous places where they may lose their property and even be personally harmed. That would seem to me to be a real hazard in itself.
“I believe it's important that we ensure that, as much as possible, we're pricing risk accurately - including through NHI.”
Asked whether he thought there was inequity in the way NHC views earthquakes compared with other natural hazards given NHC doesn’t have the same discretion for earthquake claims, Minister Seymour responded that earthquake risk is pretty uniform across earthquake prone areas, whereas other natural hazards are more specific and it’s easier to identify them and avoid building on higher risk sites.
Adaptation over mitigation
“I think the secret to a good life is understanding what you can and can't change and then acting accordingly. I look at what is happening with the government policy on climate. There's been a massive emphasis on mitigation. While a lot of people will say that we have a moral obligation to ‘do our bit’, New Zealand's mitigation activities will not affect global warming, however, New Zealand's adaptation activities will affect the outcomes for New Zealanders.”
He cited the example of engineered stop banks alongside the Tutāekurī River helping save homes in nearby Taradale during Cyclone Gabrielle as an example of where investment in adaptation can serve to mitigate the problems we face.
No GST relief
Levies and taxes account for around 43% of a home premium, according to the Insurance Council’s website. The NHI levy makes up about 24% of the premium, and the FENZ levy about 5%. GST is charged at 15% on the total amount owing, including the government levies.
When asked whether there was any government appetite
to remove GST from the levy portion of insurance premiums, Minister Seymour said, “That is not a path we should be willing to go down.
“We’ve got people who will make the point that they're paying substantial amounts of GST on cancer treatments. But the government is not making an exemption there for the reason that once you start making exemptions on GST, the only people who benefit are tax accountants.”
A watchful eye on dispute resolution
When EQC was transformed into the NHC, there were concerns expressed that its new Dispute Resolution Scheme would result in more complexity. Minister Seymour is clear that this is an area he is keeping a careful watch on.
“When I came in, the train had left the station, the legislation had passed, everything was about to happen, and I just had
to really sign off on a whole lot of preordained details, including the dispute resolution system. I looked very hard at changing the proposed set-up at the 11th hour, and in the end, I settled for reconsidering how the dispute resolution system would work.”
Minister Seymour says there have only been a handful of disputes that have gone through the new system to date, so it’s too early yet to make a call on how it’s working. He’s committed to reviewing it once there is some more volume and a better judgement can be made about how it’s performing.
