IAG rolls out new pricing to reflect weather, natural disaster risk
Monday, 29 April 2019
New Zealand's biggest home insurer, IAG, is making changes to its home and contents insurance that will mean people in disaster-prone areas pay more.
From this year, its premiums will take greater account of natural and severe weather-related risks for specific homes.
The changes take effect from July 1 and will be communicated to customers as their policies come up for renewal over the year.
IAG operates the State, NZI and Lumley brands in New Zealand. It also provides insurance through ASB, BNZ, The Co-Operative Bank and Westpac.
**READ MORE:
* Hutt homeowner's 'insurance nightmare'
* Wellington's insurance shake-up: IAG's 'conservative' approach set to ripple across industry
* IAG may not provide contents insurance cover in some Wellington homes**
Customers who live in areas that are more prone to natural disasters and severe weather events might have to pay more for insurance.
Those who live in areas that are less prone might pay less.
It follows a similar move by Tower and reports that IAG was restricting its provision of new contents policies in Wellington.
Tower's shift to risk-based pricing prompted reports of significant premium increases around the country.
Executive general manager customer and consumer Kevin Hughes said premiums needed to reflect the level of risk and costs associated with providing insurance cover, including reinsurance costs.
'Every customer and every property is different and so every policy will be affected differently, whether that be a price increase or decrease.
'We realise these changes will be a challenge for some customers and we will work through this with them,' he said.
'There are a range of options available to customers to make this easier, including taking a higher excess or adjusting the frequency of payments to suit them. We will continue to provide solutions and work to make insurance as affordable as possible.
'New Zealand's environmental risks have evolved over the past few years and we need to take more account of those risks, so we can continue to be there for our customers across New Zealand when misfortune strikes.'
Jeremy Holmes, of actuarial firm MJW, said it was more evidence of a general trend toward more granular pricing of risk by insurers.
'IAG have a large number of brands and channels through which they sell their policies. So it takes time to push through premium changes on all those channels,' he said.
'In a sense IAG is following Tower, who was the first mover in this space. All insurers in New Zealand risk-rate to some extent. But as the availability of data and modelling capabilities improve, insurers will seek to understand risk at a more granular level and price for it accordingly.
'I would expect other insurers to continue to follow suit, in order to avoid being selected against. That is, insurers don't want to have inferior pricing models to their competitors or they risk being left with only the highest-risk properties. Of course, each insurer will have their own view on the underlying risks, and it may be the case that some insurers disagree for particular properties.'
Gary Young, chief executive of the Insurance Brokers Association, said the change would have an impact on premiums.
'We have already seen this start to occur with Wellington risks where premiums have increased due to the higher exposure to natural disaster such as earthquake.'
Premium changes will also include changes to the level of cover EQC provides. From July 1, EQC will pay up to $150,000 plus GST per residential home. But it will no longer provide cover for contents.
Young said this was likely to have less of an impact on premiums than the risk-based changes.