Wellington homeowners jack up house insurance excesses as premiums spike
Wednesday, 29 November 2023
Wellington homeowners have been increasing the excesses on their house insurance in a bid to limit increases in their insurance premiums.
The Quashed online insurance comparison service analysed the quotes its users were being offered by insurers, and it revealed average car insurance premium quotes had risen 30% compared to a year ago.
Average contents and house insurance quotes had increased 13% compared to a year ago, said chief executive Justin Lim.
The news comes after 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.”
Lim said insurers were rolling out premium increases, and that was creating some extreme differences in quotes from different insurers on the same house.
Tower has increased the premiums it charges people in homes it deems at higher risk of damage from earthquakes, landslips and floods, while its rivals Suncorp, which owns the Vero brand, and IAG, which owns the State, NZI and AMI brands, is less-advanced in rolling out risk-based pricing.
“We have seen some really high quotes for Wellington properties. You can be quoted $3000, you can be quoted $9000, $10,000 or $11,000,” Lim said.
“It’s staggering,” Lim said. “We do double takes sometimes.”
The difference in insurance quotes was continuing to widen, Lim said.
The average price difference on quotes generated by Quashed from different insurers for the same cover this year was $596 for car insurance, $932 for house insurance and $409 for contents insurance.
Wellingtonians seeking quotes ended up accepting an average premium of $3913 in October and November. That compared to $1923 in Auckland, and $2601 in Christchurch.
“They (Wellingtonians) have been hit the hardest when it comes to insurance premiums,” he said.
Though insurers reporting their annual profits earlier this year said their customers remained loyal to them, Lim said Quashed had seen an increase in people shopping around for cover.
The average contents insurance quote offered to Wellington homeowners in October and November had an average of $905, compared to $714 in Auckland, and $760 in Christchurch.
Aucklanders pay more for car insurance, with the city boasting the highest crash rate of major cities, and also has high car theft rates.
The average Auckland car insurance quote was $1399 compared to $1153 for Wellington, and $1029 for Christchurch.
Lim said Wellington homeowners were responding to higher premiums by opting for higher excesses, so they pay a larger share of each claim. But it also meant they made fewer claims, as homeowners with higher excesses effectively self-insured for things like broken windows.
The average excess selected by Wellingtonians on house and contents insurance was $767.
It was $575 for Aucklanders.
Rising premiums have started to cause concern, coming on top of high mortgage rates and rates bills rising far faster than inflation.
Tower acknowledged rises, and the spread of risk-based pricing, threatened to leave some people unable to afford to insure their homes, or to insure them in the way they currently do, Tower said.
“For Tower to remain a sustainable, resilient business, we must not only be more selective about the risks we take on, but also develop cost-effective alternatives to traditional, comprehensive insurance cover,” Stiassny said.
That would include kinds of policies not seen before in New Zealand, including policies that only covered houses for some risks, but not all, leaving homeowners without cover for some damage to their homes.
“Over time, a range of options are likely to be offered including parametric cover which has already been successfully trialled in the Pacific,” Stiassny said.
“Customers are also likely to be offered the opportunity to choose the risks they want, and can afford, to cover. For example, offering fire only policies in flood-prone areas,” he said.