Whanganui District councillor Philippa Baker-Hogan.
Whanganui District councillor Philippa Baker-Hogan.
THREE KEY FACTS:
Council faced a nearly 50% increase in premiums last year (2023-24)
Council budgeted $3.75 million for the material damage (above ground) insurance premiums this year
Council to increase the deductible (excess) for non-natural disaster events to $1 million
Philippa Baker-Hogan is a triple world rowing champion, double Olympian and seventh-term councillor
OPINION
One of the biggest cost-of-living increases households and businesses have experienced since the 2011 Canterbury earthquakes and again in this ‘cost-of-living crisis’ has been the cost of insurance for homeowners and businesses.
With the need to build up the Earthquake Commission’s (EQC) coffers, as well as the inflated cost of building products, seems to me to ultimately mean we pay more for the ‘unlikely risk’ that we might be hit next.
Governments and councils are no different. Recently, Whanganui District Council officers brought a paper to the council, recommending changes to our material damages insurance policy.
Council faced a nearly 50% increase in premiums last year (2023-24), which is, I think, appalling and totally unsustainable forward, particularly with the large rate burden households are already facing.
Council budgeted $3.75 million for the material damage (above ground) insurance premiums this year but was facing upward of $4.5m to fully cover assets largely sitting in the council’s property and open spaces portfolio, which includes a wide range of assets, from our pensioner housing complexes, crematorium, Splash Centre Pool, museum, Sarjeant Gallery, i-site, dog pound, public toilets, Cooks Garden grandstands and velodrome, to name a few.
Whanganui District Council building, in Guyton St, Whanganui.
In simple terms, insurance is about moving risk to a third party. Owing to the escalating insurance premiums that have no end in sight, we are faced with having to consider taking on more risk ourselves, to keep rates affordable, by two means.
The first is removing insurance cover for a large number of assets deemed not critical, and therefore taking the hit ourselves should an event happen and then needing to decide if we replace or fix the asset.
Officers have presented a criticality matrix of all above-ground assets, ranking them from high to medium to low criticality, with assets like the crematorium ranked high and assets like the Wembley Park grandstand ranked low.
Council has decided not to insure a large number of medium to low assets and at the top of that list is the newly built wooden velodrome track, previously insured for $12.5m. The Cooks Garden southern stand at $2.8m and the Wembley Park grandstand at $878,000 is another not insured.
It’s a tough balance, and I think it’s very disappointing and sends a very poor message when a brand new asset like the velodrome track that is outside and open to vandalism is not insured and I’m pretty sure the football, rugby and athletics community, among others, won’t be too happy.
To be clear, it certainly doesn’t mean they wouldn’t be replaced, but it will be a longer discussion and decision than the insured assets and will essentially be self-insured.
The other decision we made was to increase the deductible (excess) for non-natural disaster events to $1m, meaning we pay the first $1m for these claims.
Understanding our debt capacity in a major event has been part of the process of deciding on our risk appetite. Council has a self-imposed debt limit of 200% of our revenue, with current debt just under $200m and we think we need $120m extra to recover from a major event, which might take us closer to the local government’s 280% revenue debt limit.
To be honest, it’s all a bit scary and in an ideal world we should reasonably insure all functioning above-ground assets. I’m very disappointed my colleagues didn’t support the important ‘perception and message’ not insuring new significant assets tell the community and funders about what we value.
I would guess that no one would ever consider not insuring or lifting the premium on the new Sargeant Art Gallery, but let’s forget about the velodrome!
