AMI, State customers face big premium hikes
State and AMI policyholders with homes at heightened risk from earthquakes, landslips and floods have been told to brace for a rise in house-insurance premiums.
The move follows Tower Insurance’s decision earlier this year to start individually pricing earthquake risk on homes instead of sharing the risk evenly across all its policyholders.
IAG New Zealand, the subsidiary company that owns State and AMI, said the average rise in premiums for people with homes in areas exposed to heightened risk of quakes or floods was $91.
But ‘‘a handful’’ of customers could expect increases or decreases of about $1000, it said.
AMI and State policyholders would individually learn what their premium rise or fall would be when their annual renewal notices come through, some as soon as next week.
Three-quarters of AMI and State policyholders would see their premium rise, averaging $91 a year.
The remaining quarter of State and AMI policyholders would see their premium fall, on average by $54 a year.
The changes mean IAG will collect a larger total premium haul on its AMI and State houseinsurance portfolio, but the company blamed that on an increase in weather-related claims.
When Tower made the change to individual risk-based pricing for natural disaster cover, its chief executive, Richard Harding, predicted that rivals IAG and Suncorp (which owns Vero) would follow suit.
Harding said 2.5 per cent of Tower’s policyholders would face hikes of more than $250, while 1 per cent would see a hike greater than $2000.
IAG has decided not to hike premiums at NZI, a business it owns that sells house insurance through brokers.
The areas where some State and AMI policyholders would see rises include parts of Whakata¯ ne District, Hawke’s Bay, Wairarapa, Greater Wellington, Marlborough, the West Coast, Kaiko¯ ura, Waimakariri District and Dunedin.
Areas where premium drops are expected are parts of the upper North Island (including the rapidly growing Auckland market), Taranaki, Selwyn District, North and Central Otago and Southland.
Customers in other parts of the country were expected to see average decreases in their total premium of $54, IAG’s executive general manager of consumer, Kevin Hughes, said.
‘‘We know New Zealand has many natural hazards, including earthquakes and floods, with different risks in different regions,’’ Hughes said.
‘‘In the past, the price people pay for home insurance hasn’t fully reflected these differences in risk. This is now changing.
‘‘Over the past few years, we’ve seen how New Zealand’s environmental risks have evolved, and we’re taking these risks more into account.
‘‘While we can’t ignore these changes, we can continue to be there for our customers when misfortune strikes. This means our prices must change.
‘‘Generally, a home in a location which is a high-risk area for earthquakes or floods will cost more to insure than a like-for-like home in a lower risk location.’’
IAG suggested customers consider reducing their insurance cover by lifting their excess levels, or even by buying more policies from the company.
‘‘We know that, for some of our customers, this will be a challenge and we’re committed to working with them through this,’’ Hughes said.
‘‘In the past, the price people pay for home insurance hasn’t fully reflected these differences in risk.’’
Kevin Hughes, IAG NZ