Insurance in New Zealand is changing

Sunday, 19 May 2019

What if your home insurance premium jumped from $2000 to $17000? No joke, it’s happening in some places. One woman wants us all to take heed. Scaremongering or a reality check?

Melissa Heath thinks her message to New Zealander homeowners is a scary one.

The former insurance manager, who specialised in post-quake disaster recovery, says insurance in New Zealand is changing rapidly and too many homeowners are not aware.

Those receiving huge bills from their insurance providers will know about it.

Insurance premiums have jumped since the 2010 and 2011 earthquakes in Canterbury and will rise further as insurers consider flood risk and climate change issues.

Heath said she knew of one home in Fendalton that now costs an extra $15,000 to insure. She has heard of $12,000 and $5000 increases in other regions.

**READ MORE:

Former insurance manager Melissa Heath says homeowners need to be prepared for fast rising insurance premiums.

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* A $5000 increase: Here's why your insurance might be going up

* Ombudsman Karen Stevens' home under-insurance warning

* How February 22 changed insurance**

The reason for the increase was a change by insurers to risk-based pricing, she said.

'Risk-based pricing means if you buy a dodgy, risky home you take on the entire risk for that property. It's no longer shared in the community.'

With that in mind, will premiums reduce for homes deemed to be in low-risk areas?

'Here's hoping,' Heath said, crossing her fingers.

According to Heath, it was the Canterbury earthquakes that changed everything. So far, claims for the series of seismic events have cost private insurers and the Earthquake Commission $32 billion.

Heath said that cost led to reinsurers re-examining New Zealand's risk exposure to natural disasters. Some insurance companies had since begun pricing for seismic risk, and were set to begin analysing flood risk and the effects of climate change.

She urged homeowners to think carefully about the risks associated with where they live, where they buy and where they build, and she hoped New Zealanders would become more insurance literate.

Heath has set up her own risk profiling company, but said the majority of her work was unpaid – speaking publicly and offering advice to interested parties in the financial and property sectors.

'Because insurance in New Zealand has always been a given and has always been such a low issue, people don't think about it; they don't do the necessary research, which is now essential.'

So, in a market where insurers are seemingly able to charge what they like, who's monitoring their behaviour?

Heath said the Reserve Bank monitored them from a prudence perspective while the Financial Ombudsman kept watch over behaviour.

'There's also the Fair Insurance Code, which all insurers sign up to and has an external resolution system.'

Heath is also concerned about the high rates of under-insurance in this country. Treasury has estimated up to 85 per cent of homeowners are under-insured.

Heath said she saw it first hand after the Kaikōura earthquake, when she led a team of assessors for IAG. Some homeowners had only insured their home for the value of their mortgage.

She wants us all to be better prepared for the next disaster, whenever and wherever that may be.

* Frank Film – Changing South is funded by NZ on Air to produce South Island stories. For more Frank stories, visit www.frankfilm.co.nz