AI promises huge rewards for companies investing in the technology. Photo / 123rf
OPINION
Bill Bennett is a freelance New Zealand technology and business journalist.
Future of Kiwibank
When Kiwibank was set up a generation ago, the plan was for a locally-owned bank that could compete on a level with the four major Australian-owned banks. Today it remains the fifth largest bank with less than 10% of the market. It’s widely recognised that Kiwibank needs a substantial capital injection if it is to grow and compete in the market.
Government ministers have asked Kiwibank’s board to explore possible paths for an expansion. This could potentially include investment from the private sector or a Crown entity.
When asked about their support for a potential part-privatisation of Kiwibank, the response was resoundingly positive with 82.6% saying they are in favour of the idea with just 7.6% saying they are not. The remaining 9.8% are unsure.
One bank CEO supports the move, but questions whether such a move would deliver cheaper banking to consumers.
Economist Cameron Bagrie is unsure about a part-privatisation saying he “doubts it would materially change the bank’s competitive settings”.
A number of business leaders think part-privatisation does not go far enough. The head of an investment business says it should be more than part-privatisation: “Government should perhaps retain a small stake”. A couple of respondents questioned the need for Kiwibank’s existence, with one suggesting: “We are over-served by banks for population” and another asking why the Government should need to own a bank.
For others the part-privatisation makes sense. A communications sector boss says: “Building the balance sheet to challenge the Australian banks would be impossible without that move”, while the head of a consulting business is in favour because: “In part as this would further encourage greater market disciplines”. The head of a legal firm says: “Kiwibank needs capital to remain competitive. It shouldn’t be owned 100% by the Government.”
Generative AI
An overwhelming majority (85%) of business respondents to the NZ Herald survey are investing in generative AI or machine learning projects.
AI promises huge rewards for companies investing in the technology. It can boost productivity and efficiency by automating routine tasks, leaving human workers to focus on more strategic matters.
It can also be used to deliver personalised customer experiences, but perhaps its greatest potential lies in pulling useful information from vast amounts of data and generating new ideas or solutions to problems.
There are risks. Generative AI sometimes “hallucinates”, which can mean embarrassing or costly errors. It uses vast amounts of data which can include sensitive information, so guarding against privacy breaches is essential. And there are intellectual property concerns that could lead to litigation.
As CEO of a technology-focused business, One New Zealand’s Jason Paris is a keen advocate of AI. He says: “We have been one of the leaders in this space for over a decade, have a chief data and AI officer on our executive and have more than tripled our investment in this area over the last five years to keep ahead of the game.”
Paris is not the only boss to have already enjoyed the benefits of AI. The leader of a large investment business says: “AI is a massive driver of our business. It’s creating enormous opportunities for our data centre businesses already and this will flow into fibre, telco towers and subsea cables as AI applications expand across the economy.”
The leader of a credit business says the business already has had patented machine learning models and technologies for decades and is now moving towards AI.
A power industry boss describes the technology as a fundamental disruption.
An infrastructure sector chair says: “We have been exploring successfully and applying generative AI and machine learning within the software side of our business and more recently on the design side.”
At the same time he is aware of the risks: “We remain very selective in terms of choice of AI tools to protect company and client data.”
Other leaders say they either already have completed projects or that they are moving forward with the technology.
A consulting CEO explains: “It is core to how we are refining operating and delivery models.”
A handful of comments came from leaders of businesses where AI is not yet fully embedded, but they talked being at the reviewing or training stage.
Insurance
Recent years have seen a clear trend towards risk-based insurance pricing.
In the past insurers would spread risks across their entire portfolio. Increasingly premiums are tailored towards the specific risks properties face. This approach can be particularly difficult for policyholders operating in areas where there are increased risks from floods, cyclones or from seismic activity.
Tower Insurance CEO Blair Turnbull says risk-based pricing is a fairer way of pricing insurance: “Because it means you only pay for the risks that may impact you and your property. It sends important market signals about where to buy and invest and means Tower can offer sharp pricing for properties with lower risks.”
He says risk-based pricing ensures the continued availability of reinsurance at a reasonable price. “Tower has prioritised transparency with customers. Our online tool shows how earthquake and flooding risks influence the premium for individual homes. We have had positive feedback from customers since launching the tool and our research shows that 87% of Kiwis think risk-based pricing is a fair way to price insurance.
“Ultimately to keep insurance affordable and accessible for the long term, New Zealand must stop building in stupid places immediately. And we must do more to mitigate the risks from natural hazards. The adaptation framework under way is a positive step towards ensuring New Zealand’s resilience through climate change.
“It’s worth noting that insurance premiums are influenced by a range of factors including inflation, supply chain constraints and the cost of reinsurance.
“Some 45% of your premium is made up of taxes and levies collected on behalf of the government.”
When asked how risk-based pricing has affected premiums, six out of 10 (60%) business leaders say the effect has been negative. Only one in 20 say the change affected them positively. A quarter of respondents said their premiums have stayed the same.
CampusLink CEO Anne Gaze says the change has had a negative impact on her premiums “particularly in sectors with elevated risk exposure such as natural disasters and cybersecurity”. Premium increases have required businesses to reassess coverage and implement additional safeguards.
“In the context of New Zealand’s current political climate, there are additional factors influencing risk assessments — significant changes in control and ownership in resource management, water control, and local governance structures, which impact insurance risk calculations and subsequent premiums for businesses operating in New Zealand.”
David Carter, executive chair of the Beca Group, notes that the advent of risk-based pricing has made it harder to get project insurance. Other leaders commented that insurance is increasingly unavailable, while KiwiRail CEO Peter Reidy says the increases for infrastructure insurance premiums means that other risk mitigation strategies are being considered.
A leading banker observes a side effect of the change. He says: “Risk-based pricing is important to appropriately value risk so that it is managed, for example, climate adaptation.”
The CEO of a major tourism business notes the insurance situation is “worse than here in New Zealand and that the worst is yet to come”.
Many business leaders rate the Opposition Finance Spokesperson highly.