Commercial Properties and Insurance Premiums 

We’re always told that what goes up must come down. But why does it seem like the cost of commercial property insurance premiums defies this message? Well, that’s because it does. 

Insurance premiums are increasing considerably at this moment, with an upward trend over the past few years. With many unprecedented changes around the world, followed by natural events experienced in New Zealand (such as cyclones and floods), prices of everything have increased, including your property.  

Today, we’ll look at insurance premiums, how they’ve changed, and what we at Azure can do to help you as landlords. 

What’s Happened to Cause These Increases? 

We all know the major culprit for major changes in today’s world: the pandemic. The pandemic affected many aspects of trade, closing borders and making imports and exports practically impossible.  

With the pandemic came a decrease in labour and materials.  

Due to high demand and insufficient supply costs of building construction and equipment have significantly increased. Construction labour rates have also risen by 28% since 2019. 

Companies are also facing major delays on construction projects due to supply chain issues and difficulties in sourcing materials. These delays directly impact reinstatement timeframes, increasing the risk of business interruption. 

If that wasn’t enough, New Zealand, especially the North Island, has been ravaged by severe weather events that devastated lives and property. In response, we’ve seen the cost of insurance premiums rise to match the rising cost of the rebuilds. We have seen increases as high as 60% in the last 12 months, so it is really important to have an advocate for you and your tenants while negotiating these new premiums. 

What Changes Have Happened to Commercial Property Insurance Premiums? 

Insurance premiums have been known to experience ebbs and flows, but in the past few years, we’ve only seen it rising.  

All the disasters and changes in the world have caused for uncertainty about the safety of your property and belongings. Insurance companies are now more aware of the increased risks that we seem to face each year. The way they combat that? By increasing your premiums. 

However, there are ways that you can be better prepared for these changes in your premium prices.  

Underinsurance 

Other factors contributing to the rise in commercial property insurance premiums point to underinsurance and reinsurance costs. 

Underinsurance occurs when businesses do not have adequate insurance coverage in place, leading to higher costs when replacing stock, machinery, and specialist equipment. 

Keeping your insurance valuations up to date keeps you protected if things go wrong. Undervaluing your property is a risk that may bring major consequences when the time comes to file a claim, especially if your property suffers significant damage needs substantial repair or even replacement.  

Inflation  

Inflation is causing property values to increase significantly, which in turn affects the amount of insurance coverage needed. When a property is revalued at a higher amount due to inflation, the current insurance policy may no longer be sufficient to cover the new value. 

Insurers are managing their risk by maintaining their existing capacity, which means they are not willing to increase the amount of coverage they provide for a particular property. This leaves the property owner in a position where they need to seek additional insurance from other providers to cover the gap between the original insurance amount and the new, higher property value. 

Securing this additional insurance coverage can be more challenging, as the property owner now needs to find one or more insurers willing to take on the extra risk. This process can be more time-consuming and may result in higher insurance premiums, as the additional insurers are taking on more risk and may charge more for their coverage. 

How Azure Can Help 

At Azure Property, we’re all about providing much-needed services to landlords. We know how difficult it can be to navigate the world and changes it brings, but we’re here to help. 

Our commercial property experts can sit down and chat with you, helping you make sure the insurance you have is right for you and keeping it up to date. 

Let us take the stress and care for you, your property, and your tenants. 

Give us a call if you’d like some help making your finances make sense.