Rising insurance premiums cause concerns for homeowners in New Zealand
Rising insurance premiums cause concerns for homeowners in New Zealand | Insurance Business New Zealand
Insurance News
Rising insurance premiums cause concerns for homeowners in New Zealand
What drives insurance costs up?
Insurance News
By
Jonalyn Cueto
Home insurance premiums have reportedly risen by over 30% in some parts of the country within the past year, leading many consumers to let their policies lapse due to high costs.
According to price monitoring data presented to the Treasury last month, this significant jump in premiums is largely due to increased inflation and a string of severe weather events that hit the nation last year. Kris Faafoi, chief executive of the Insurance Council of New Zealand, acknowledged the challenge this poses to homeowners, stating, “We know that consumers are doing it tough at the moment.”
The trend was highlighted in a Consumer NZ survey, which found that 8% of respondents had allowed their home insurance policies to lapse, indicating a concerning level of financial strain. According to RNZ News, this development could leave homeowners at risk in case of future natural disasters.
Faafoi pointed out that although recent premium increases have been steep, the industry analysts expect them to stabilize in the coming months. However, he noted that there are long-term concerns about the growing frequency and severity of weather events.
Factors contributing to insurance costs
The severity of weather-related events has had a profound impact on the insurance sector. Cyclone Gabrielle and the Auckland Anniversary floods were “massive events,” resulting in payouts totaling approximately $3.7 billion, a dramatic increase compared to typical flooding payouts of around $350 million. This substantial increase is driving up insurance premiums, with insurers needing to cover these extensive costs, according to Faafoi.
To manage rising premiums, homeowners are advised to communicate with their insurance providers to explore options to make coverage more affordable. These may include increasing policy excesses, reducing coverage amounts, or exploring other adjustments that could lower costs. Faafoi encouraged homeowners to have open discussions with their insurers to ensure they have adequate coverage.
“If the worst were to happen, they’ve got the right premium to replace what they’ve got,” he said.
The rising costs of insurance have also affected other sectors. Last month, RNZ reported that Catholic churches in Otago and Southland were rejecting traditional insurance policies due to skyrocketing premiums, opting instead to create a million-dollar trust fund to cover repair costs in the event of a disaster.
Faafoi noted that a significant portion of insurance premiums comprises taxes and levies, including the Fire and Emergency levy and the Earthquake Commission levy, contributing to the high costs.
“There’s lots of drivers that go into the striking of a premium – not all of them are within the purview or the control of the insurance sector,” he said.
Despite these challenges, Faafoi expressed optimism about the resilience of New Zealand’s insurance market.
“[The market is] pretty well-functioning at the moment,” he said, encouraging homeowners to seek ways to stay covered while navigating the changing insurance landscape.
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