TAKING COVER FULL STORY B3
Door not closed on Wellington insurance, says IAG
IAG — the country’s largest home insurer — says it is continuing to offer new house and contents insurance in Wellington as commerce minister Kris Faafoi calls on insurers to give more information to the public.
Faafoi said he was meeting with insurance companies because he wanted them to reveal more about the availability of policies and riskbased decisions.
“I am aware there is an approach across the industry towards greater risk-based pricing and that some companies are being selective in offering policies,” he told the Herald.
Earthquake minister Megan Woods earlier raised the issue, claiming IAG had shut up shop in the capital due to high earthquake risk.
She said while other insurers had moved to risk-based pricing, IAG was just not offering cover.
IAG had about 50 per cent of the Wellington market. Treasury officials met with IAG on Tuesday to seek assurances about the situation.
In response IAG said it had been taking a conservative approach to offering new insurance in the Wellington region for many years due to the high natural risk in that part of the country.
“Following the Kaiko¯ura earthquake we undertook a conservative approach to providing insurance in Wellington due to high natural peril risk in the area,” IAG New Zealand executive general manager Kevin Hughes said.
The company had since reviewed its approach to both new and existing customers and said cover would be considered on a case-by-case basis.
“IAG’s approach to insurance is something we continue to assess. Taking into account feedback we’ve received from customers recently, we are looking to broaden our approach to new business in Wellington,” Hughes said.
Last year, rival insurer Tower announced it was taking a risk-based pricing approach to its insurance.
From April it began charging customers in higher risk areas like Wellington, Napier and Gisborne higher premiums while others living in lower risk areas like Auckland saw a reduction in the earthquake-related portion of their premiums.
At the time Tower said the change would see fewer than 2.5 per cent of its 350,000 customers facing an increase of more than $250 while others could get a see a cut of between $10 and $100.
That would mean a person with a $1.3 million property in Auckland’s Dairy Flat area might pay just $40 of earthquake-related costs for cover.
While someone with a $535,000 house in a high-risk part of Petone could expect to pay $1400.
The Herald understands IAG’s move is isolated and other insurers are not expected to follow suit.
Private insurance is heavily linked to EQC cover as individuals must have private insurance to access EQC pay-outs for natural disasters.
From July EQC will cover the first $150,000 of damage up from $100,000 but will no longer cover contents insurance.
The EQC Act also includes a provision that means if someone can prove they can’t get insurance privately it will step in to provide insurance for natural disasters directly.
Woods said it had not reached that situation yet but it was an area that would be looked at as part of a second phase review of the EQC Act.
Faafoi said he was meeting with insurance companies because he wanted to know more and to ask them to share more information with consumers about availability of policies and risk-based decisions.
“I have also requested information from officials so we can better understand the scale of the problem and consider any actions that might be needed.”