Competition and Profitability in New Zealand's General Insurance Sector: emerging policy issues

Abstract

This article examines competition and profitability in New Zealand’s general insurance market. Given the country’s high exposure to
earthquakes, severe weather and climate risks, effective competition is vital for ensuring that insurance markets deliver efficient risk
pricing, protect consumers from excessive costs, and safeguard financial stability. Benchmarking against international peers using
combined ratios, returns on equity and net profit margins shows that New Zealand insurers consistently report higher profitability.
Although differences in data and scope limit the precision of these comparisons, the overall pattern is evident. While catastrophe
exposure explains part of the divergence, the scale and persistence of ‘excess profits’ point to structural weaknesses in competition.
Strengthening competition and improving affordability will be critical to protect households and support financial resilience.