Rising insurance costs mark a challenge in New Zealand's economic landscape

Rising insurance costs mark a challenge in New Zealand’s economic landscape | Insurance Business New Zealand

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Rising insurance costs mark a challenge in New Zealand’s economic landscape

Economist notes broader implication of economic pressures

Insurance News

By
Roxanne Libatique

Recent statistics have revealed that New Zealand’s headline consumer price index inflation remains at 4%, with notable increases within the insurance sector, according to the Council of Trade Unions (CTU).

Housing and vehicle insurance premiums, in particular, have risen by more than 20%, highlighting a significant inflationary pressure in this essential service area.

Insurance inflation in New Zealand

Craig Renney, an economist and the director of policy at CTU, pointed out the disproportionate impact on necessary expenditures.

“Inflation was being generated by rents, (4.7%), rates (9.6%), and insurance (14%). Rents are rising at the fastest rate since they were recorded in 1999. Housing and vehicle insurance increased more than 20%. These are all in areas that working people can’t avoid,” he said.

The report detailed that while some traditional inflation drivers like food prices have stabilised, insurance costs continue to escalate, showing a higher inflation trajectory compared to other sectors. This trend presents a complex challenge for the Reserve Bank of New Zealand as it evaluates the effectiveness of interest rate adjustments in curbing such sector-specific inflation.

“Inflation is now in sectors that don’t respond well to interest rate changes in New Zealand – such as insurance. This should give the Reserve Bank a reason to pause and reflect on its future interest rate path,” Renney said.

Impacts of economic pressures in New Zealand

Renney noted the broader implications of these economic pressures.

“Prices in New Zealand are responding to pressures such as population growth and climate change. The absence of both a plan and investment from government in these areas suggests an absence of action on future price rises,” he said.