Keeping your insurance in check with inflation
Tower's Chief Claims Officer Steve Wilson gives some insight into Tower's response to inflation and what you can do to make sure your insurance is fit for purpose.
Inflation reaches into all corners of our lives, even the less obvious parts like how much your current insurance policies cover you for.
If you take a closer look, you’ll find it’s more expensive to repair and rebuild your home, and it’s also more expensive to repair and replace your car and contents than it was 12 months ago.
It's easy to understand why you may not think twice about inflation when it comes to the value of your car. But supply chain pressures and a worldwide semiconductor shortage, along with a recent spike in fuel prices, have seen some interesting things happen in the market.
There has been unprecedented inflation across the used vehicle market in Aotearoa – just look at the Toyota Hilux, it has appreciated in value by 20-40% compared to last year. For second-hand vehicles and replacement parts we’ve seen a 14% rise in value, making the cost to fulfil a motor claim higher.
You might have heard more about the rising costs in the construction industry. If you own your own home, it probably doesn't feel pressing, but construction costs will suddenly become relevant should you need to repair or rebuild your house. The costs of house materials for example also rose 4.6% in the June 2021 quarter alone due to supply chain constraints.
We see it every day. Inflation has contributed an additional $7.1 million to our regular claims’ costs during the last financial year – the average claim cost for a house has gone up by 6%.
How Tower is responding
It’s in our nature to be future focused here at Tower, and we could see this inflationary market coming.
We’ve taken a range of steps with this in mind, including:
- We factor in paying up to 20% over the sum insured for unexpected costs (such as inflation).
- We check the sum insured on your house policy through the independent Cordell rebuild calculator at renewal time.
- We help keep your insurance costs down by being proactive and vigilant in other areas of our business, such as encouraging the use of automation and our online self-service platform to improve and speed up our claims processes.
What you can do
While there’s a lot that we can do to help keep inflationary pressures in check for our customers, there are also actions you can take to give you peace of mind that your insurance remains fit for purpose.
For your house insurance:
- Check your sum insured (you can do this at any time). Double check the details are right based on your knowledge of your property - things like the quality of materials used to build the house.
- At the very least, don’t reduce your sum insured.
- Keep your house well maintained. For example, proactively ensure your wiring and plumbing is up to date and get your fireplace serviced.
- To avoid common claims altogether, like fire and smoke damage, check smoke alarms and don’t leave cooking unattended. Make sure your roof is in good condition heading into Winter, to avoid rain or water damage.
For your motor insurance:
- Check your policy details and that you’re comfortable you have the policy you need to replace your vehicle as you would like.
- Consider changing to a market value policy rather than agreed value.
- If your car is safe to drive, check that your repairer has the parts they need for the repair before dropping it off.
- Drive safely and ensure your maintenance is up to date – don't delay replacing your tyres for example.
The key action you can take is to double check your current sum insured on your house and motor insurance. I also encourage you to shop around. Actively assessing your options for policy benefits as well as price could be well worth the effort.