Fewer people willing to ‘subsidise’ those living in flood zones - IAG

Monday, 5 August 2024

Homes continue to be developed in flood-prone areas, and an increasing number say the Government should stop such development.

A rising proportion of people with homes in areas at low risk of natural disasters object to paying more for their insurance so people with with homes in high-risk areas can pay less.

IAG, which owns the State, AMI and NZI brands, has published its latest climate survey of public attitudes.

On many climate fronts, views have not changed greatly since the first survey in 2018, but as house insurance premiums have risen, hearts have hardened to insurers making owners of properties in higher-risk areas pay increasingly higher premiums.

In 2019, just 41% of people agreed that it was OK for insurers to increase premiums for owners of riskier properties.

That had risen to 61%, IAG found in its latest survey of 1000 people.

And for the first time in its seven years of surveying, IAG asked if people were willing to pay more for their house and contents insurance to “subsidise” the cost of insurance for people who lived in high risk areas, and 65% said they were not.

A new report finds major failing in Hawke's Bay emergency repsonse as Cyclone Gabrielle hit the region.

IAG also found that 31% of those surveyed said it was OK for insurers to increase premiums on riskier homes, even if it took them beyond the point the owners could afford.

There has been a creep of increased risk-based pricing on individual properties since Tower began to go down that road in 2018. The two largest insurers IAG and Suncorp, which owns Vero and has a majority stake in AA Insurance, are following suit with increased risk-based pricing on individual homes.

There have also been fears of “insurance retreat” with insurers refusing to insure homes and businesses in some places.

The Treasury has been tracking insurance availability, though has so far has found few places where homeowners don’t have a choice of at least two insurers.

However, IAG found 31% of people felt it was OK for insurers to decide not to insure homes and businesses in very high risk areas.

But, if insurers did pull out of some areas, 53% said the government should “step in”, though less than half wanted to see their tax dollars spent subsidising private insurance, or launching a state-owned insurance company of last resort.

While general concerns about climate change have not moved greatly since IAG began its survey, last year’s Auckland Anniversary weekend flooding, and Cyclone Gabrielle, appears to have increased the proportion who expected to see a significant increase in extreme weather, and flooding, in the next 30 years.

Amanda Whiting, chief executive of IAG New Zealand.

That pattern was not shown in people’s expectations of more wildfires, or extreme droughts, with expectations similar in 2024 to those in 2018.

IAG reported a drop in confidence that the Government was doing well with its policies to tackle climate change.

In 2018, 27% of people told IAG the government was performing poorly, but that had risen to 40% in 2024.

The Opposition accused the Government of being in “lala land” after it released its draft emissions reduction report under the Zero Carbon Act last month, which revealed its policies mean the country is no longer on course to hit its longer-term emissions reduction pledges under the global Paris Agreement.

“They don’t care about ensuring we have a stable climate for future generations, they only care about the bottom line and tinkering around the edges,” said Labour climate spokesperson Megan Woods. “We need bold action to transform our economy and ensure people, homes and livelihoods are secure in the future.”

But IAG found a portion of the population was not concerned about climate change, and did not think action was needed. That appeared to be in the region of 10% of people surveyed.

Insurers have been calling for development to stop in areas that will be at increased risk of flooding and coastal inundation in the next few decades.

Its survey found 80% agreed, and a similar proportion wanted to see more investment in defensive infrastructure to defend those already at risk.

IAG chief executive Amanda Whiting said: “The Government’s focus on adaptation and recent investment in flood protection is a good start, but we need to do more so that communities who are exposed to the impacts of climate change can be safe and resilient.”

In 2023, many west Auckland people had their homes flooded. Some had their homes bought by Auckland Council with help from the taxpayer.

Another topic that has made increasing headlines is “managed retreat”, the term given to abandoning buildings that are no longer safe for people to live in.

IAG found just over half of people felt authorities should “buy out” people whose properties were severely impacted by climate change.

That happened in Auckland after the Auckland Anniversary weekend flooding, though Auckland Council said it could not afford to do it again.

But IAG found mixed attitudes to who should pay for the impacts of climate change.

There was an even split between people willing to pay more to reduce the impacts of climate hazards through mechanisms like property rates, if they did not personally benefit from them, and those who were not.

And 16% of those surveyed said they would not accept decisions made by local councils relating to climate change, if they affected their properties.