Insurance through the roof
Roy Howell was told his house would cost an extra $10,000 to insure next year.
A $10,000 insurance premium hike from financially troubled Tower Insurance was a bit rich for Christchurch homeowner Roy Howell, who had to find another, more affordable insurer.
Tower confirmed the price rise from $2300 a year to $12,843 and said there was more to come for other Kiwis.
The company will roll out fully risk-based assessments for flooding, erosion, storm and other identifiable risks.
Howell lives in a
1920s bungalow in the well-heeled Christchurch suburb of Strowan-Merivale, close to St Andrew’s College.
He said his insurance broker was gobsmacked at the increase. ‘‘They never gave me any warning, just a letter. I have a mortgage so the bank needs insurance certification. Increases like [this] could break a sale.’’
Howell said his broker found alternative cover from another company that was modest compared with Tower’s $12,000.
‘‘I’ve supported Tower over
30 years so I was pretty annoyed when they dropped this on me. My earthquake repairs were relatively small – about $40,000,’’ Howell said.
Tower’s team leader of retention, Hayden Lewis, sent Howell a letter apologising for the lack of communication.
‘‘To hear your premiums will be increasing by over $870 a month this year would be disturbing for anyone so I can completely understand your response,’’ Lewis wrote.
‘‘We really have valued being your preferred choice for insurance for many years, and understand that Tower’s decision to change our approach to pricing house insurance has had a significant impact on you.
‘‘The reality is that the insurance costs to cover earthquakes (called reinsurance) can differ a lot between regions.
‘‘Our new approach removes much of these cross-subsidisation in house insurance premiums, meaning what customers pay will more accurately reflect the cost of providing cover for their individual property.
‘‘We are confident that this change is the right thing for Tower, but that does not mean it was an easy decision for us to make. You have a large home with a high sum-insured value, and you are located in an area that has extremely high risk of severe damage in a major earthquake.’’
NZbrokers service manager Simon Moss said Tower appeared to be disengaging from some regions. It was possible to assess risk on a house-by-house basis with all the data that was available nowadays, he said.
Insurance Council chief executive Tim Grafton said Tower was the only New Zealand company to go to a fully risk-based approach.
Two of insurance giant IAG New Zealand’s brands, State and AMI, had moved to partial riskbased cover but nowhere near the extent of Tower.
The premiums of homeowners in the likes of Auckland, the largest market, would be reduced under Tower’s formula, and those still operating under a pooling formula might find themselves at a disadvantage.
‘‘The most expensive year for insurers for storm damage was
2017 at $243 million. But this still pales into comparison with the Canterbury earthquakes at
$21 billion, including commercial property, as well as EQC’s $12b.’’
Tower chief executive Richard Harding recently issued a statement about the premium rises, saying they would mostly apply to high-spec homes in high-risk locations such as Wellington, Napier and Gisborne.
About 3 per cent of the company’s customers would be affected by rises.
Tower recently posted an $11m loss for the half-year ended in March 2018.
‘‘I’ve supported Tower over 30 years so I was pretty annoyed when they dropped this on me.’’ Roy Howell