Home insurance will become more limited andhardertoget
Insurer Suncorp has told the Government there has been a “step-change” in global reinsurers’ attitudes to New Zealand.
“The step-change in 2023 is that New Zealand no longer presents only significant earthquake risk, but also significant weather risk to reinsurers,” Suncorp said in a submission, published this month, to Parliament’s inquiry into how the country is set to adapt to climate change.
The result is that the pricing and level of coverage offered by reinsurers has, and will continue to, change, Suncorp said.
Insurers like Suncorp, which owns Vero and has a majority stake in AA Insurance, and IAG, which owns brands including State, AMI and NZI, buy reinsurrance to help them pay claims in the event of massive natural disasters that would otherwise threaten to send them broke.
On a national level, Suncorp said global reinsurers would look favourably on New Zealand investing in climate resilience to lessen future losses from extreme weather events like floods. But, it warned “Suncorp, like other insurers, must take action to mitigate or reduce its exposure to risk where maintaining cover at current levels would impact its ability to operate sustainably and pay claims for its customers.
Suncorp revealed in August that it had systems in place in New Zealand to allow it to individually risk-rate homes in New Zealand for things like earthquake and flood risk. Suncorp said that a risk becomes unacceptable for insurers when it ceased to be “sudden and unexpected”, and became an event with a high expectation of occurring. It warned some homeowners would find insurance becoming more expensive, more limited, and harder to get.
Insurers may even withdraw from the highest risk locations, it said, a process known as insurance retreat.
While Tower has progressed further down the path of charging higher premiums to homes at higher risk of things like earthquake and flooding, Suncorp and IAG have only signalled their intent to expand their property-specific hazard risk-pricing.
Justin Lim, chief executive of the Quashed insurance comparison website, said the online insurance comparison service had not yet been made aware of any insurers just flatly refusing cover to homeowners.
However, he said some had seen “massive spikes” in the premiums quoted to them. In some cases homeowners could not get online quotes, and had to call an insurer directly, Lim said.
He believed that was because insurers were gathering specific information on the homes people wanted insurers to help them gauge the risk of insuring them.
Late last year, Quashed reported some people had been quoted some very high premiums for cover on their homes, depending on how risk-prone insurers deemed them, but all homeowners had seen big increases in their insurance costs.
The average price difference on quotes generated by Quashed from different insurers for cover had risen $932 in the 12 months for house insurance, its data to the end of November showed.
Lyall Carter, spokesman for the West Auckland is Flooding group of owners of homes flooded in the west of Auckland a year ago, said people in the group had seen their premiums rise.
But, “we haven’t had anyone reporting astronomical rises.”
The increase in premiums on his own home had increased, but not by more than those of family and friends.
Tower has been more outspoken than IAG or Suncorp on risk-based pricing for house insurance, and last year Tower chairperson Michael Stiassny warned: “The unpalatable truth is that not everyone is, or will be, able to afford to insure their home in the way they do now.”
Parliament’s climate adaptation inquiry is examining how the country should enable communities to relocate from areas at high risk from climate change, including before a disaster happens.
The Insurance Council Te Kāhui Inihua o Aotearoa has told MPs that retreat from areas was a last resort.
It has called for much better planning to prevent the continued building of properties in places like flood zones.
It envisioned a future in which some homeowners in high-risk locations, like those with places on cliff-tops have their homes reassessed as to whether they pose intolerable risks to life every three years.
It said the country needed a centralised government agency to oversee these risk assessments.
The inquiry is also looking at what portion of the costs of managed retreat should be met by property owners.