Insurance bills start to hurt in capital
Kurt is dealing with an insurance problem.
The Wellington man, who does not want to be identified, is trying to sell his wife’s parents’ house.
One offer has already fallen through because of issues getting insurance for the house, which needs to be repiled.
‘‘The insurance on the house renews in three weeks,’’ he said. ‘‘And we have been quoted $7000 annually for them to take the risk. At the moment it’s only $1200 annually. I don’t know how we can sell the house without it, though. We are between a rock and a hard place.’’
It’s becoming more of an issue in the capital, as IAG hangs back on new and renewing house and contents policies. Tower has already introduced risk-based pricing, which means people with riskier properties pay more to insure them.
Bindi Norwell, chief executive at the Real Estate Institute, said she had heard of a ‘‘handful’’ of instances where people were struggling to get insurance on properties they wanted to buy.
‘‘At this point it’s not unmanageable, as there are other providers willing to fill the void, albeit at a cost in some cases. However, time will tell how much of an issue this is in the Wellington region.
‘‘If insurance companies won’t roll over insurance from the vendor to the purchaser or if people are unable to get insurance then this could have a significant impact on Wellington’s housing market and people will be unable to move.’’
She said people were also worried that premiums would rise and make insuring against earthquake damage unaffordable.
‘‘If people choose to only insure their property for fire damage because of affordability issues, then this could lead to major problems for the Government down the track should there be major earthquake.
‘‘One agency we spoke to is insisting on an insurance clause in every sale and purchase agreement to ensure that purchasers have their insurance ahead of going unconditional to avoid problems with finance further down the track.’’
She said people who were thinking about selling soon should get insurance sorted first, and work through any Earthquake Commission claims that were not resolved.
‘‘In terms of whether IAG’s position might affect investors, they may weigh up whether any additional costs or risks associated with insurance will affect the viability of investing in property. Until we know how the insurance market reacts to IAG’s news it’s hard to comment further.’’
Craig Lowe, of Wellington firm Lowe & Co, said he had heard of people finding deals took longer to transact because of insurance problems. He said when policy prices had increased, it had had more of an effect on the apartment market because it forced body corporate fees up. That affected what buyers were willing to pay, he said.
Insurance expert Michael Naylor said all insurers were moving to the risk-based pricing models.
‘‘This raises the possibility of a collapse of the disaster insurance market in Wellington. It has happened in overseas markets. ‘‘
Napier and Palmerston North might also have problems, he said. ‘‘However it is a question of what percentage of clients which insurers have in the higher risk area. Wellington represents a high percentage of any company’s risk, so they focus on it. Palmerston North does not, so accepting a number of risk clients there will not bankrupt an insurer.’’
A council survey showed the capital had the nation’s largest stock of homes more than 75 years old, and the fewest residents living in houses less than 25 years old.