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6 October 2020

Insurance Market Outlook - Spring 2020

Part 3: Legislation and the insurance market   

The concluding part of our Spring 2020 Insurance Market Outlook, takes a look at key legislation likely to impact risk exposure for clients, and offers some thoughts on what might lie ahead for the insurance market as a turbulent 2020 draws to an end.

The Privacy Act 2020 comes into effect

A long overdue reform of New Zealand’s privacy legislation comes into force on 1st December 2020 when the Privacy Act 2020 takes effect. The new Act delivers an updated legal framework for the protection of information, which includes mandatory reporting for data breaches.

The revised Act states that businesses will need to notify regulators of privacy breaches that cause, or are likely to cause, “serious harm” to affected individuals. Under the Act failure to notify the Privacy Commissioner of a notifiable privacy breach (without reasonable excuse) is an offence with a fine of up to $10,000.

The important thing to remember for all businesses, is that it doesn’t matter whether you have a customer database, an employee register with health and salary information on it, or even whether you’re a school with student and parent information on file; breach notification obligations will apply to you. In this regard, the Act will not differentiate between a national company with multiple regional offices and several hundred staff, or a local lawn mowing contractor who holds the email addresses of a handful of clients.

It is possible to insure some of the exposure created by this Act under polices such as professional indemnity, statutory liability, directors and officers liability and cyber insurance.

Employment Relations (Triangular) Amendment Act 2019

This Act came into effect on 27 June 2020 and updates the Employment Relations Act 2000 to provide more robust protections for workers by allowing them to join a “controlling third party” to a personal grievance claim.

Where a business is using labour supplied by a third party labour hire business this new legislation now makes it easier for either the worker, the labour hire business or the Employment Relations Authority/Employment Court to join the original business to any employment dispute litigation.

We are working with insurers to make certain that all relevant insurance policies, such as employment disputes insurance will respond to this new avenue for claims as the claimant need not be a true “employee” in the literal sense of the word.

Looking ahead

As we enter the final quarter of 2020, it is somewhat difficult to gauge where the New Zealand insurance market is heading.

On the one hand the mainstream insurance companies have suffered a drop in underwriting profits and are facing increased reinsurance costs – a formula that usually leads to a hard market and increased premiums. Yet on the other hand regulators are keeping a careful eye on insurance pricing for customers feeling the pinch from Covid-19.

We expect that we will see a modest increase to insurance pricing through the rest of 2020. However, we anticipate that this will not be consistent either across insurers or by policy type. A client’s occupation, geographic location and claims history will go a long way to dictating market appetite and pricing.

As such it is imperative that insurers are engaged with early and comprehensive information is provided in order to differentiate their risk and attract capacity providers.

The longer term outlook for 2021 capacity and pricing may well be impacted by further natural catastrophe losses if the predictions for the Atlantic hurricane season turn out to be accurate. For the sake of the people that live in the path of these storms, and also the sake of the insurance market, we hope that they are wrong.

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One of our responsibilities as a broker is to ensure you have all the information you need to make informed decisions about the risks you and your business face.

We hope you find this advisory helpful. If you have any questions please contact your broker.  

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