Insurance premiums set to rise

Increasingly expensive vehicle repairs, government levies, theft and extreme weather are all contributing to rising insurance costs

Builders and other tradespeople could soon be paying more for their insurance due to a confluence of factors. Builtin’s Ben Rickard said that premiums are going up “right across the board because of higher costs, increases in compulsory government levies and increased worldwide claims because of natural disasters”.

In particular, vehicle and building repair costs are becoming more expensive, increasing the cost of cover in those areas.

Following an increase to the Fire & Emergency Levy that came into effect at the start of July, the government recently announced it is increasing the EQC levy to 20 cents per $100 of cover for residential property and contents insurance from the start of November.

The levy is capped at the first $100,000 of cover for homes and $20,000 of cover for contents. The extra revenue will be used to replenish the New Zealand Natural Disaster Fund. For most homeowners with house and contents cover, this will increase their insurance premiums by $69 per year. Rickard said he expects the effect on builders from this increase to be minimal.

“While they’ll see an increase in their own house and contents insurance, it’s not charged on contract works insurance in most situations.”

While he said it was impossible to put a figure on how much a builder or tradesperson’s own business insurance costs could increase, Rickard expects it may be higher in some cases than in others, particularly when it comes to vehicle and tools insurance.

He also added that he wasn’t aware of any evidence that homeowners forced to pay higher insurance would be likely to reduce their spending on home maintenance and renovations.

Lock it up

 A higher occurrence of tool theft is another factor that could see builders and tradespeople pay more.

“The amount of theft has skyrocketed and that means losses on tool insurance policies are also going up, so premiums will go up to reflect that.

“Just this week a client of ours in Queenstown had $30,000 worth of tools stolen. In towns like that and in rural places they don’t expect it to happen like it does in the big cities, but tool theft is a business for some thieves and they’ll go where the pickings are easy,” said Rickard, adding that there were several things builders could do to combat thieves.

“Educating the industry is a big part of what we do. The police often run drives in conjunction with merchants to have people engrave their tools with an LBP number, phone number or other unique identifier, which helps to discourage theft and aid recovery.

“If tools are locked in a container, tool trailer or a vehicle, use a good heavy lock, wheel clamp and park off the street. It’s also important that builders are aware of their surroundings and keep an eye on who might be poking around, because unfortunately a lot of theft is associated with people visiting or working on a job, either directly or indirectly.”

An up-to-date asset register that includes serial numbers, purchase price, photos and when and where their tools were purchased can help to ensure a swift claim turnaround.

“Technology is also getting to the point where people can use GPS or RFID tags to track expensive equipment and receive alerts to their phone if something’s taken,” said Rickard. “It’s becoming more affordable and is something we’re investigating to see if it’s feasible for us to provide that service or offer discounted rates where they’re used.”

Every cloud…

Rickard said that rising premiums often provide an opportunity for people to shop around to ensure they’re getting the best deal.

“There’s a lot of competition in the insurance industry, so an increase can give people the opportunity to take stock and look for a better deal, in terms of both price and cover. If they look around, they might find they make some savings.

“However, there can also be a downside to switching insurer, particularly if you’ve been with them for a long time. There could be a lot of goodwill and beneficial terms the customer might lose if they went elsewhere.”