Disasters push house-insurance premiums up more than 30pc
House insurance premiums jumped more than 30 per cent in a year in parts of New Zealand, price monitoring data provided to Treasury shows.
The same data reveals that, while insurance is still widely available, some home insurers appear to have withdrawn online quotes for entire regions.
A climate-change researcher specialising in disaster economics says the data is a taste of what could come as the risk of climate changedriven natural hazards, especially flooding, increases.
Actuarial consultancy Finity has monitored insurance premiums since late 2022 for a dataset of 2000 properties across New Zealand, chosen to match the natural hazards profile including earthquake, flooding and tsunami risk.
The addresses are real but other information, such as property age, sum insured and construction materials, has been randomised so that the “houses” in the dataset are not real people’s homes.
The data, provided to Treasury and government ministers every three months and released to RNZ under the Official Information Act, showed that insurance remained widely available in all regions between September 2022 and July 2023. However, premiums have been steadily increasing since Finity first began price monitoring.
The average cheapest quote across the main dataset of 1400 houses, chosen to reflect earthquake risk across the country, rose 22.6 per cent, from $1423 to $1744.
The two most recent quarterly reports, including one from January this year, were withheld from RNZ as they have not been shared with Cabinet ministers yet.
The most expensive regions tallied with the highest earthquake risk.
However, some of those regions, including all parts of Wellington, only had small percentage increases to premiums, after the previous Government increased the amount E●C will pay out on claims to $300,000.
Finity also reported on how many of four major underwriters in New Zealand — AA Insurance, IAG, Tower and Vero — would provide insurance quotes online, as a way of measuring insurance availability. More than 80 per cent of properties in the main dataset could get online quotes from three or more underwriters.
However, choice was more limited for the 303 properties in Wellington and the Hutt Valley: none were able to get an online quote from more than two of the underwriters.
Just 7 per cent of Marlborough homes in the dataset were able to get a third quote. A small proportion of homes in central Wellington, Hutt Valley, Marlborough and Canterbury could not even get two quotes online.
Houses in some towns with high flood risk, such as Westport, were also less likely to be able to access multiple online quotes, along with houses in areas with high tsunami risk.
Victoria University’s chairman of economics of disasters and climate change, Professor Ilan Noy, said the jump in premiums was “very significant.
The third-party risk modelling used by insurers was improving and some insurers were now pricing at individual property level — meaning some people would be noticing even bigger increases than the data suggested, Noy said.
Outgoing Insurance Council chief executive Tim Grafton, whose tenure ends this week, was more circumspect about availability, saying the Finity data only represented some insurers. Of those insurers, many might be prepared to insure a property once they had spoken to a customer on the phone and gathered more details.
The size of recent premium increases was “unusual”, he said.
Part of that was due to construction inflation, which had pushed up rebuild costs by about 30 per cent over the last two years.
The Finity data included a 17.5 per cent increase to the total sum insured for each property to reflect that.
The other major factor was a jump in costs for reinsurance (essentially, insurance for insurers in the event of a major natural disaster). That had increased by 25 to 40 per cent for many insurers in the last year.