Prices rising with costs
04 Aug 2017
Suncorp New Zealand, in its annual results, says it will keep increasing premiums due to the cost of the Kaikoura earthquake, as well as higher building and car repair costs.
“GWP [gross written premium] growth across the portfolio will be supported by Suncorp’s pricing response to claims cost trends and the reinsurance impacts of recent natural hazard events,” it says, commenting on its outlook.
Suncorp New Zealand’s general insurance business reported a NZ$47 million profit after tax in the year to June 30 - a NZ$100 million drop from last year.
Further explaining how its net claims costs increased by 20% over the year to NZ$735 million, Suncorp New Zealand says:
“Motor claims costs have increased due to strong unit growth and average claim cost inflation. Claims frequency shows a small upward trend, attributable to a higher number of cars on the road.
“Average repair costs are rising due to a combination of a greater mix of larger vehicles on the road, more complex parts and increased labour costs…
“Home claims frequency was flat with average claims costs increasing due to higher building costs…
“Several large commercial claims have impacted on current year profits however underlying claims frequency remains within expected thresholds.”
While Suncorp New Zealand has flagged premium increases for the future, prices have already been on the move.
In the past year it achieved GWP growth of 7.3% in its motor business, thanks to both premium increases and it getting more customers by increasing its market share and as well as there being more cars on the roads.
More customers and higher premiums also saw the GWP in its home business increase by 10.8%.
“Product pricing changes have been implemented in response to an increase in claim and reinsurance costs,” it says.
As for Suncorp New Zealand’s commercial business, this experienced GWP growth of 4.4%.
“Price changes have been implemented in the second half to mitigate increased earthquake reinsurance premiums. These are early indications of prices hardening in response to recent natural hazard events.”