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President's report

The importance of adequate insurance for New Zealanders has never been more critical than it is in our current times.

The combination of an economic recession, costs from climate-related events, and the general challenges of an increasingly complex society, mean that insurance should be at the top of all business and individuals planning during 2009. So far the insurance industry has weathered the economic storm lashing the world with a great degree of success.

The key issue looking forward will be the insurance industry's ability to reserve adequately for the combined challenges of reduced investment income, increased claims for weather-related events, and increased compliance costs for regulation.

The recent year has seen the beginning of a hardening of the insurance market, particularly in the Personal Lines and Motor areas of New Zealanders. While rates have not increased as dramatically in the commercial sector, the message the industry will need to get across to New Zealanders during 2009 is that New Zealand is now a more costly risk than two or three years ago, and premiums are likely to continue rising for very sensible reasons.

Insurance Council Members' customers have been very understanding in the pressures placed on the insurance sector. They have understood that insurance must follow other increases like power and property rates, but the insurance industry has been at pains to explain the challenges we are now facing. We believe we have seen some success in this area.

The economic impact on insurers has seen a reduction in investment income. It has seen the beginning of a concerning trend of New Zealanders reducing their level of insurance, and also the issue of under-insurance which could create problems for many New Zealanders in the year ahead. The Insurance Council is working hard to alert New Zealanders to the danger they expose their businesses and families to as a result of cutting back on insurance during recessionary times.

During the period under review we have seen a new government come into office in New Zealand. While they have been immediately challenged by the economy, they have also indicated a very strong commitment to many of the issues the Insurance Council has been publicly raising. In particular the issue of law and order is seen as a high priority for the new government, and this is something the Insurance Council also believes requires increased scrutiny to reduce the damage that criminals are doing to our society and economy generally.

Increasingly the insurance industry has been calling for greater safety on our roads and transportation systems. Particularly in the motor vehicle area we are now seeing a greater emphasis on motor vehicle safety and this is something the insurance industry will be strongly supporting.

In the area of regulation we have seen the introduction of the Financial Product Providers' Registration and Disputes Resolutions Bill and also the introduction of the Financial Advisers' Act. Both of these are likely to increase regulation on the industry and hopefully protect our customers from any failures by companies in the insurance sector. While this regulation is welcomed, it should be noted that the insurance sector in New Zealand has remained strong and continued to deliver fully to its customers while other areas of the finance industry have struggled.

We are now working towards the introduction of Prudential Regulation through the Reserve Bank, with developing Prudential Regulation Legislation including solvency and capital adequacy models, and also the introduction of the Insurance Contracts Act. The Insurance Council will be representing the insurance industry's general support for this legislation, whilst addressing specific issues that may be of greater advantage to our customers.

The Council has updated its website to assist New Zealanders with information they may require when insuring. In addition the Council has been actively involved in creating an industry-branding project which will explain to New Zealanders the enormous value that the insurance industry continues to add to our economy and society.

Education issues remain high for us in attracting young people into the industry, and this continues to be a priority.

In the finance area the development of the IRFS Phase 2 International Accounting Standard continues, along with our work with the Actuarial and Tax industry.

The insurance industry will continue working with communities and encouraging them to be prepared to cope and to recover from the increasing effect of climate-related events on our nation.

Overall the year in review has been challenging, but successful.

I would like to thank the Committees and Working Groups represented within the Insurance Council. The hard work of individual members continues to add value to our customers.

To my colleagues on the Board I thank them for the contribution they have made during a demanding year, and in particular would note the contributions of Rieny Marck, Nick Hawkins and Rob Ryan, who all moved on to new positions during the year in review.

In recent years we have increased the membership of the Insurance Council due to the benefits for insurance companies' customers being provided by the Council and its Executive. I thank the Executive for their work during 2008. The Insurance Council retains its proudly held view that we present to New Zealanders some of the great benefits that can be obtained from a well-regulated, well-run and highly competitive insurance industry. An industry that is now providing products to New Zealanders that protect their families, loved ones, businesses, homes and their communities.

It is with great pleasure that I have been able to contribute to the work of my industry colleagues in the Insurance Council during the reporting period, and look forward to continuing the contribution that we make to New Zealand society and economy.

John Balmforth
President

Insurance Council of New Zealand

 

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