By Restaurant Association partner, Gallagher Insurance
In 2023 we saw a paradigm change in the insurance market in New Zealand as a result of two significant weather events at the start of that year; the Auckland anniversary floods and Cyclone Gabrielle. Our clients lodged more claims from these two events than they did after the 2011 Canterbury earthquake.
The number one objection that New Zealand businesses used to have when buying insurance was “It won’t happen to me”. That is no longer a valid objection.
The majority of NZ businesses have purchased business insurance. However, they also have an assumption that they are fully insured and will be able to financially survive a total loss from an insurable event. This is becoming a flawed assumption.
Unfortunately, a significant proportion of businesses are materially underinsured. This means that they won’t have enough insurance cash paid out to be able to trade through a total loss event. This is important because total Loss events are on the increase.
Three years of high inflation is a big contributing factor to this underinsurance situation. Business owners are trying to mitigate large premium increases by not increasing sums insured values or by even reducing cover. This is understandable as they face increases on most expense lines in their business.
Insurance is a financial instrument that should be used to transfer insurable risk to an insurance company’s balance sheet.
In the current environment we are seeing businesses losing sight of how much risk they are inadvertently holding themselves as they use premium savings as the predominant purchasing criteria for their insurance programme.
In our profession we get to see the consequences of underinsurance at claim time and it’s never easy to deal with.
That’s why our brokers have a goal to show their clients what Fully Insured looks like by asking the tough questions, so that they can make more informed decisions on what insurable risk they are holding themselves. We don’t want surprises at claim time as it’s impossible to fix after the event.