Insurers seen getting chop
High levels of dissatisfaction that Cantabrians have with their insurance companies will damage the market share of some of the industry's big players, says a university academic.
Dr Michael Naylor, a senior lecturer at the School of Economics and Finance, said the increasingly bad publicity some insurers were attracting would have a substantial impact.
There would be a decrease in market share for the worst performers, with customers able to switch easily. This would be followed by a fall in share price said Naylor, who has expertise in insurance.
Some American insurance companies that had performed poorly in responding to the damage from Hurricane Katrina in 2005 had seen their market share drop by up to 33 per cent; New Zealand insurers could lose 25 per cent market share, he said.
However, insurers contacted by The Press said such falls were unlikely in the context of the Australasian share market, and that share price falls were generally only linked to such things as the insurer not having enough reinsurance backing.
Naylor pointed to a recent survey by volunteer group InsuranceWatch as having strong implications for the future market share.
The survey asked 1000 Christchurch residents about their satisfaction with the response of their insurance companies since the earthquakes. Based on their results the IAG-owned group of companies, Banks, Lantern, NZI and State, as well as Suncorp-owned AA, Vero and SIS Group, could not be recommended as customer-friendly insurers, Naylor said.
The InsuranceWatch survey found that 78 per cent of Vero's customers reported them as being “poor” to “awful”, while only 46 per cent of State customers had received a site assessment. Many described those assessments as partial, incomplete, or brief, Naylor said.
The negative impact of such bad publicity on the IAG and Suncorp (owner of Vero) groups would be felt far beyond Christchurch, with bitter complaints by word of mouth being damaging for brand and market share.
“The decline will be drastic once affected Christchurch claimants are finally paid out and are free to switch.”
International research showed the impact on United States general insurers of poor responses to natural disasters could be substantial and long lasting, he said.
There could also be an impact on the Australian stock market, via analyst downgrades, with IAG brands also being heavily criticised in Australia over their response to claims relating to recent Queensland floods.
IAG's New Zealand chief executive, Jacki Johnson, said as the largest general insurer IAG was in a position to impact most positively on solutions to some of the issues that have slowed progress.
The company was taking a collaborative approach, looking to work closely with other agencies and community groups on Christchurch's problems.