Damage from extreme weather cost insurers $321.6 million last year

Tuesday, 18 January 2022

Tracey and Darren Hedges are having to stay in a motel after their house was extensively damaged in September's storm.

Insurers’ total extreme weather claims topped $321 million last year, setting a new record.

In late December, the Insurance Council Te Kāhui Inihua o Aotearoa said insurers paid a record $305m in claims on extreme weather events.

But it has updated the figure to $321.6m to take into account final claims for gale force winds and storms hit the South Island in mid-September, which cost insurers $36.5m.

In 2020, extreme weather events resulted in insurers paying $274m in claims.

* Reserve Bank warns owners of flood and fire-prone homes will pay more for insurance

* $122 million of insurance claims made after July's great storm

Kumeu was flooded in August after torrential rain.

Insurance Council chief executive Tim Grafton said the September storms fitted a pattern of extreme weather events that were being driven by climate change.

Insurers have also blamed higher claims costs on sharp rises in the costs of construction, and replacing used cars, which made settling claims more expensive.

In November, Tower reported that its cost to rebuild a damaged home rose 12 per cent in the year to the end of September.

Grafton said the September storms affected large swathes of the South Island and the Canterbury region and resulted in 4346 claims. Most were from homeowners.

Homeowners should expect more extreme weather events, and more damaging ones, says Tim Grafton, chief executive of the Insurance Council.

There were 2360 house insurance claims, 1337 claims on business insurance polices, and 583 claims on motor vehicle policies.

“The average house claim exceeded $4000 while storm damage to motor vehicles led to many being written off with average claims running at $10,870,” he said.

Grafton said extreme weather events would become more frequent and severe.

Speaking late last year, he said the claims paid only reflected a portion of the damage caused by extreme weather as some damage was not covered by insurance.

“Taking under-insured and uninsured losses into account, total economic losses may be twice this level,” he said.

Uninsured losses, including insurance excesses and damage to things that could not be insured, were bourne by individuals, local councils, and government agencies, he said.

Significant weather-related claims events this year included late May’s Canterbury flooding, June’s South Auckland tornado, July’s flooding affecting the upper South Island and lower North Island, including Westport and Wellington, and August’s Auckland flooding.

Some owners of flood-prone properties faced increases in insurance premiums as Tower insurance had begun risk-rating individual homes based on the risk of them flooding.

The Reserve Bank Te Pūtea Matua warned other insurers would follow Tower’s lead.