Extra insurance premiums for the worst flood-prone homes hit $4500-a-year.

Wednesday, 24 July 2024

More and more owners of flood-prone homes are being quoted elevated premiums because of the heightened risk.

Treasury’s latest insurance monitoring report shows insurers continue to roll out risk-based pricing across the properties they insure, with those at highest risk of flooding being quoted an extra $4500 in premiums.

Risk-based pricing sees individuals properties with higher flood, earthquake or other risk being charged more for insurance.

The previous quarter, the highest extra flood premium was $4000, however, in most parts of the country homeowners are still able to get quotes from at least two, or three insurers, the report showed.

However, there are now some suburbs in low-lying suburbs in Wellington and Christchurch where homeowners may now find themselves trapped with their current insurer, as no other insurer will bid for their business.

These include Avondale and Woolston in Christchurch, and Lower Hutt and Miramar in Wellington.

The report, prepared by consultancy Finity for Treasury, outlines data collected in April, and is the latest in a series of reports into the availability of insurance for homeowners.

Treasury commissioned the series of reports as there are major financial stability and fiscal risks to taxpayers, if homeowners cannot get insurance for risks like flooding, or cannot afford to pay for it.

Hayley Taylor talks about escaping floodwater from family's Browne Street home.

A series of disastrous flooding events, including last year’s Auckland Anniversary weekend flooding, and Cyclone Gabrielle, have seen taxpayers and ratepayers stumping up to buy homes from owners, where those homes were considered no longer to be safe to live in.

The floods have also prompted fears that insurers may pull out of some areas- a process known as “insurance retreat“.

Finity reported to Treasury that in the first quarter of the year, insurance remained generally available for people living in flood-prone areas.

It sought online quotes from insurers for 3510 home “profiles”, with the quotes sought from IAG companies State and AMI, as well as Vero, Tower and AA Insurance.

Owners of homes that were at high risk of flooding were able in 92% of cases still to be able to get online quotes from at least two different insurers.

Treasury is monitoring the availablity, and affordability, of house insurance as fears of ‘insurance retreat’ mount.

However, Finity also found that insurers quoted extra premiums for highly-flood prone homes compared to homes not threatened by flooding.

In the first quarter, Finity found a quarter of quotes on high flood-risk properties were quoted an extra flood premium. That was up from 18% in the previous quarter.

Availability of insurance for earthquake risk remained widespread, with most homes getting online quotes from at least three insurers. The exception was the Canterbury region, where many homes only had two insurers providing online quotes.

Just because online quotes are not offered does not necessarily indicate insurance is unavailable, as sometimes insurers will make offline quotes, after gathering more information from homeowners.

Wellington and the Wairarapa are now the most expensive places to insure homes.

Premiums continued to rise throughout most of the country, Finity told Treasury.

Wellington central and Wairarapa were the two most expensive places to insure homes, Finity found, with Auckland and Northland the cheapest.

Despite the increased roll-out of risk-based pricing for insurance, there remains a long way for the process to go before it is universal.

Finity found that in April, when it came to homes that had both a flood and earthquake risk, 44% of online quotes included only minimal flood pricing.

But, Finity reported: “We have observed increases to the number of quotes with EFP (estimated flood premium) in excess of $250.”

Finity did not find evidence that homes in tsunami zones, are at a higher risk of landslip, or areas at higher risk of liquifaction were yet being charged more, or were finding it hard to get insurance.