Got questions about the cost of your State cover? Get answers here.

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1 Got questions about the cost of your State cover? Get answers here. What s up with insurance prices? Sometimes it feels like they re always on the up and up. So here s some info about what s been happening. Our strong underwriting and pricing disciplines mean you pay a fair price for your insurance cover. But because we regularly review our pricing, your premium could change every year based on a number of reasons. There are two main factors impacting the price you pay the number of claims we receive and the average cost per claim.

2 Where does your money go? When you pay your premium, only some of the money actually goes to State. Your total premium is made up of a number of costs, and here s how it breaks down: State premium This is what you pay to State for insuring your car, home or contents. This is the money we use to pay claims and other expenses to run our business. The Earthquake Commission (EQC) Levy The Earthquake Commission provides limited cover for natural disasters including earthquakes, landslips, volcanic eruptions and tsunamis. We collect this on behalf of the EQC. The Government implemented an increase to the EQC levy which took effect on 1 November Reinsurance Insurance companies also need insurance called reinsurance. Reinsurance helps to cover the cost of claims if there s a major disaster such as an earthquake. Tax GST is charged at 15% of the total amount owing, so any increases to your State premium, including any levies charged means you ll also be paying more GST. The Fire and Emergency Levy We all hope we never need Fire and Emergency New Zealand, but it s good to know that it s there. You may be aware that the New Zealand Government implemented an increase to the Fire and Emergency Levy, which took effect on 1 July We apply this levy on insurance premiums, which we collect on behalf of the Government. The Government has completed a major reorganisation of the Fire Service to set up Fire and Emergency New Zealand that combines urban and rural fire services. The changes were made because the Government recognises that fire-fighters now respond to a wide range of emergencies, including medical callouts, flooding, hazardous substance spills and road accidents. Information about the levy has been made available by the Government at firelevy.co.nz.

3 Why s car insurance increasing? The price you pay is impacted by a number of factors specific to you. For example, your age; driving history; type of vehicle and location. As these change so does the amount you pay for your car insurance. Additionally, car insurance premiums have been affected by an increase in the: 1. number of claims 2. average cost of claims Reasons for these increases: Increased claims costs Frequency of claims Average cost of claims Increase in the number Average market value More frequent claims Higher repair/replacement costs of vehicles on the road of cars on the road for newer vehicles due to vehicle technology has increased Driver distraction due Rain sensors in Intelligent braking to in-car devices windscreens systems We constantly review our prices to ensure you are paying a fair and appropriate amount for your car insurance.

4 What makes up the cost of Home insurance? The Christchurch earthquakes lead to significant increases in the EQC levy and a rise in the cost of reinsurance. 15% GST Fire and Emergency Levy EQC Levy State Reinsurance costs Government costs collected by all insurance companies Note: The figures used in the graph are based on the national average increase for all customers. Numbers are from November 2017.

5 Here are the other key factors contributing to the current increases in home premiums: Reinsurance costs continue to increase In recent years there have been an unusual number of natural disasters both in New Zealand and around the world. The unexpected frequency and cost of these natural disasters has stretched the financial resources of both New Zealand insurers as well as the global reinsurers who cover their losses. The average cost of claims is being impacted by: One of the reasons the number of home claims has increased is due to the following: An increase in building costs Ongoing natural disasters Because construction costs have increased we ve adjusted Ongoing adverse weather events and earthquakes our premiums to keep up with repair/rebuild costs. around New Zealand have resulted in an increase in Costs associated with methamphetamine (meth) contamination the number of claims. The number of meth-contaminated properties has increased and the cost of decontaminating a home can be significant. State has introduced meth contamination cover under some Home and Car policies.

6 What s affecting Contents insurance prices? Contents premiums are also affected by an increase in the number of claims and the average cost per claim. Some of the main reasons are: Stuff Technology We own more of it. TVs, mobile There s more technology in the phones, tablets and laptops - there things we own. For example are more opportunities for our mobile phones do more than just things to get lost, broken or stolen. call or text, they re mini computers that practically run our lives. Hearing aid technology has also improved. But these advances come at an increased cost when it comes to repairing or replacing these items.

7 We re here to help. It s important that you have the right level of cover to suit you, especially if you need to make a claim. Over time, the things you own and your circumstances can change, so it s a good idea to review your cover from time to time. If you d like to discuss your cover, give us a call on SI6714/1-3 12/17 We ll help find the best solution for you STATE.CO.NZ