Bizcover Report Reveals the Hidden Cost of Tariffs on Insurance Premiums

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Tariff. Undoubtedly the hottest topic of 2025, as the President of the United States looks to implement wide-ranging impacts on trade partners, but for many of us, somewhat of an enigma.

It's well known that tariffs impact the price of goods. When a product is imported from a nation subject to tariffs, the cost is ultimately passed on to the importer, and in many cases, the consumer. What is less widely known, however, is the impact of tariffs on insurance providers such as BizCover NZ [https://www.bizcover.co.nz/].

In this article, we'll explore how insurance works and how tariffs may impact the insurance supply chain. What, if any, lessons can be learned from this, and how will insurance firms respond to these changing challenges?

The Basic Principles of Insurance

Insurance is often a concept that many people have some involvement in, but little understanding of how it truly works. Let's break down the basics [https://www.icnz.org.nz/individuals/the-basics/] and get an idea of how insurance works to protect us from the impacts of sudden events.

Think of all the things you own at home - from whitegoods, such as a fridge or washing machine, personal items such as rings and jewellery, right through to vehicles such as cars and motorbikes. These items are big, pricey, and it's often challenging to put the money together to replace everything at once if something goes wrong, such as your house being robbed, burning down, or getting damaged in an earthquake.

Insurance, at a very basic level, allows participants to transfer the financial impacts of such a risk occurring away from themselves, to an insurance provider, in exchange for an ongoing fee. Depending on the circumstances, if something bad suddenly happens to your valuables, and your insurance is up-to-date, you may be eligible to make a claim and receive a repair, replacement or payout for items you have covered.

In a place like New Zealand, where natural disasters can happen at any time, insurance provides people with peace of mind. When something goes wrong, they know that things will probably be OK.

Behind the scenes, insurance companies assess risks and fees to determine insurance premiums for their customers. Funds received are deposited into a group of money called an insurance pool, which enables insurers to use insurance premiums to cover claims as they arise.

Over time, claims come through, and insurance companies assess and pay those out that they deem to be valid. This allows insurers to offer a compelling product at an affordable price.

Understanding Tariffs

Tariffs impact a different part of the economy; however, their impacts can be felt far and wide, so it's helpful to understand what they are and how they can impact the prices of products we buy.

A tariff is a type of government taxation imposed on importers of products exported from other nations. In recent times, the Trump Administration has been particularly fond of announcing tariffs that have wide-reaching impacts, with a number of tariffs announced this year [https://www.mfat.govt.nz/en/trade/mfat-market-reports/update-on-us-tariffs-10-april-2025] that impact some of the products exported from New Zealand.

If a tariff is imposed on a product, it means that consumers are likely to be charged more for the same product - this is often because exporters cannot afford to absorb the tariff fees on their own. The impacts, of course, can be seen in the United States, where the tariffs are being imposed, with reductions to shipping loads, increased costs, and even TikTok trends of consumers decrying the increased costs of purchasing products from overseas.

How Can Tariffs Impact Insurance?

Tariffs can have an impact on insurance, even if consumers are not directly impacted by them. This is because of the delayed impacts they can have on the insurance process.

Tariffs contribute to broader insurance volatility, which is the uncertainty that exists in prices between when a customer purchases insurance and the time they make a claim. This is because insurers set prices well in advance, with the help of risk adjusters and actuaries. While the price may be right at the time of purchase, factors such as inflation and tariffs can drive up the costs of completing claims.

This, in turn, can have an impact on insurance pools. More expensive claims can lead to a reduction in the number of claims that an insurance pool can process, limiting the total number of members with claims that can be paid out before an insurance provider begins to incur losses.

There's also a third critical factor to consider - time. Often with insurance claims, there is a desire for speed and urgency, with claims often having an impact on the well-being of consumers. Volatile costs can hamper the ability of insurers to respond quickly, particularly if there is time spent going back and forth from insurer to supplier, negotiating rapidly changing costs.

Mitigating the Insurance Risk of Tariffs

How do insurance companies account for the risks of tariffs and other elements of insurance volatility? Unfortunately, whilst insurance providers have a number of options, the choices they have can often be deeply frustrating to consumers.

Take, for example, increasing the size of the insurance pool by raising prices. For insurers, increasing the cost of a product means that they can offer the same level of cover while accounting for increased operating costs. While this might be preferable to some insurers, this can lead to increased financial pressure [https://www.consumer.org.nz/articles/new-zealanders-have-rising-concerns-about-insurance-costs-as-financial-pressures-mount] on consumers.

Alternatively, insurers could look to add additional clauses and restrictions on coverage, limiting the amounts that they pay out on certain events, or being stricter on policy claims. This may increase the ability of the insurance pool to pay out certain types of claims, but again, this can be deeply unpopular.

For now, it's the early days of tariffs, so it will take some time for their impact to flow into the insurance market. While they can cause a great deal of uncertainty for insurers and consumers alike, they also serve as an important reminder to ensure we understand exactly what our insurance covers.

Hopefully, this article has helped provide a greater understanding of how insurance works and how events such as inflation and volatility can impact it. While tariffs may not be the hot word of the day in 2026 and beyond, hopefully, the lessons learned can paint a better picture of how insurance works more broadly.

Disclaimer: This press release may contain forward-looking statements. Forward-looking statements describe future expectations, plans, results, or strategies (including product offerings, regulatory plans and business plans) and may change without notice. You are cautioned that such statements are subject to a multitude of risks and uncertainties that could cause future circumstances, events, or results to differ materially from those projected in the forward-looking statements, including the risks that actual results may differ materially from those projected in the forward-looking statements.

Media Contact
Company Name: Bizcover
Contact Person: Michael Gottlieb
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City: Wellington
Country: New Zealand
Website: https://www.bizcover.co.nz/

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