The insurance industry can be divided into two distinct groups: general insurance and life insurance. General insurance companies provide cover for incidents such as fire, house and contents loss, and motor vehicle and marine damage, whereas life insurance companies usually offer life, disability and health insurance, and superannuation. While some of the major insurance companies operate in both areas, they usually do so as two separate businesses. This is because different laws govern the two areas and both have different financial reporting standards.



Accidental injuries and earthquake damage covered by Crown Entities



New Zealand's insurance industry is unique in two ways. Firstly, New Zealand has a no-fault system for accidents. There is a Crown Entity called the Accident Compensation Corporation (ACC), which provides New Zealanders with cover against all personal injuries. This means private insurance companies do not have to offer policies in this area. Secondly, New Zealand is at risk of earthquake damage. The Earthquake Commission, another Crown Entity, provides cover for earthquakes and other natural disasters to individuals with insurance policies against house fire.



Small number of large insurance firms dominate the market



Most insurance companies operating in New Zealand are part of international firms. Although there are 313 insurance companies registered in New Zealand, the dominant players in the general insurance market are State and NZI. Some of the largest companies in the life insurance industry are AMP, AXA and Sovereign. Many companies in this industry have merged in the last few years. Some smaller companies have been taken over by larger ones, some of which are international insurance companies. This has resulted in fewer companies operating in the industry and some insurance companies now have their head offices overseas, usually in Australia. These mergers have also decreased the number of branches insurance companies have. This trend is expected to continue and the industry is now characterised by a few large organisations, that cover a wider range of risks than before, and some small companies specialising in niche markets, such as travel insurance.



Growth in customer service and call centre work



The main growth areas in insurance work are customer service and call centre roles. The increase in call centre work is linked to the centralisation of services, as call centres allow nationwide queries to be handled in one location. The growth in call centres and offshore management is possible because of improvements in technology. Insurance companies now also provide information and sell products over the Internet. The highly competitive nature of the industry has also resulted in strategic alliances, particularly between life insurance companies and other financial organisations. For example, many insurance companies now sell their policies through organisations such as banks. Also, most life insurance companies now offer additional financial and investment services, and in many ways operate as financial service companies.



Insurance industry affected by international reinsurance companies



The New Zealand insurance industry is influenced by changes in the industry overseas, particularly in reinsurance companies. Reinsurance companies are international companies that allow insurance companies to insure their risks. The premiums reinsurance companies charge insurance companies directly affect the premiums charged to New Zealand consumers. Additionally, claims paid overseas also affect the premiums paid in New Zealand, as reinsurers are global companies. As a result of a worldwide increase in the number of natural and weather-related disasters, as well as those related to terrorism, overseas reinsurance companies have increased the cost of their liability and property insurance, and premiums for New Zealand insurance policies have risen. The New Zealand insurance industry has been recently affected by weather-related disasters. In 2004, $1.3 billion worth of claims were made, $145 million for flooding in the Manawatu region and Whakatane.



Increase in demand for different areas of insurance



The insurance industry is also affected by the demand for different types of insurance. There has been an increase in the demand for insurance against electronic risks, particularly related to e-commerce. The industry is expecting growth in the number of policies they sell over the next few years. However, it is likely that mergers between insurance companies will continue, more insurance company procedures could come from overseas, and some roles could be based overseas. (Written 05/03/2004 - Updated 31/05/2005)