Premiums skyrocket at Tower
Homeowner Satyan Mehra was shocked to discover his Tower house and contents cover would cost almost $1000 more this year than it had the previous year.
His house in Green Bay, Auckland, was built in 2014 and, while it has four bedrooms and three bathrooms, he said it was nothing too flash or particularly risky.
But instead of $2089 for a year’s cover, it now costs $3012.
Auckland investor Shelley Begg, meanwhile, said the cost of two of her policies had increased, one by 40 per cent.
She said she was told the change was about Tower wanting to more fairly distribute the cost of earthquake insurance.
It comes as a Wellington homeowner, Ursula Egan, complained on social media that her Tower policy had increased from $2200 to $7200 a year.
Some of the change is due to increases in the Fire Service and Earthquake Commission (EQC) levies. From November 1 last year the EQC levy increased from $180 for house and contents policies to $240 a year. The fire levy rose by a maximum $30 a year for houses and $6 for contents.
But Tower is making some other changes that affect what customers pay. It announced in April that it would start pricing premiums based on how at risk a property was for earthquakes.
Tower chief executive Richard Harding said at the time that the company would stop ‘‘subsidising’’ higher-risk properties in order to send a clearer message to homeowners about the risks in their backyards, and to more fairly distribute costs.
Harding said the majority of the company’s 350,000 customers would not see any significant change in their premiums.
Less than 2.5 per cent would receive a hike of more than $250, and 1 per cent would see a hike greater than $2000, he said.
The move is a change from the traditional approach of insurers, which is to pool risk across policyholders.
Tower has been approached for comment.
Insurance law specialist Crossley Gates said other insurers might follow Tower’s move.
‘‘I hear anecdotal speculation that if there is another large earthquake in a city centre in New Zealand, parts of New Zealand may become uninsurable,’’ Gates said.
‘‘The key to it is the reinsurers. If they won’t provide catastrophe reinsurance cover, local insurers may not be able to provide earthquake cover because they . . . could face insolvency.’’