Premium rise for Tower customers at high risk of sea surge flooding, landslips

Wednesday, 20 August 2025

A series of natural disasters, including flooding and landslides during the 2023 Auckland Anniversary weekend storm, has opened the eyes of many homeowners.

Tower Insurance customers whose homes are at higher risk of landslips or flooding from sea surges face an increase in the premiums they have to pay.

Tower was the first of the larger insurers to move to far deeper risk-based pricing, under which owners of properties at higher risk of natural hazards like earthquakes and riverine flooding pay higher premiums.

The third-largest insurer behind IAG and Suncorp NZ is now extending its risk-based pricing to charge higher premiums to owners of homes at higher risk of sea surge flooding or landslips.

The move would see about 5% of Tower’s policyholders pay an average of $100 more in annual premiums, and about 5% would pay an average of $300 more, though the rises would be phased in over several years.

But the other 90% of policyholders will see average reductions of $70 in the risk-based portion of their premium, Tower said, although that did not mean they would see a decrease in their total insurance bill.

In preparation for announcing the move, Tower paid Octopus Group to survey a representative sample of 1050 people on their attitudes to climate risk, and on how socially acceptable deeper risk-based pricing was.

Strong winds and heavy rain in island Bay, power lines can be seen draped along Reef St.

Octopus Group reported 70% felt it was fair for insurance premiums to reflect the risks of insuring individual properties, rather than owners of less risky homes paying higher premiums so owners of riskier properties could pay less.

The surveying also revealed that many owners of higher-risk properties knew work was needed to reduce the threat of sea surge, or slips.

However, many could not afford to have the work done, or didn’t know how to set about it.

Of the 4% of people surveyed who said they had experienced sea surge flooding, nearly half had done nothing to flood-proof their homes, and 55% said their local council had not undertaken any mitigation measures.

When they gave a reason for not spending money to make their homes more resilient, 34% said they didn’t know where to start, and 30% said they could not afford it.

There were similar results for the owners of homes which had experienced landslides.

For property buyers, the survey indicated that 86% of people believed it was important to have information about a property’s risk profile, and 67% people would not buy a home that was at higher risk of natural disaster. Others said they might, but would expect to pay less. Just 3% said they would not be concerned about higher natural hazard risk when looking to buy a home.

It could be hard for buyers as homes near to each other can have very different risk levels in events like extreme rain or sea surges.

In media briefings before the announcement on Wednesday, Tower showed commercially sensitive maps of areas, including Cook’s Beach in Waikato, and Kohimarama in Auckland, where Tower considered some homes were at higher risk of sea surge flooding, but others were not.

There have been clear indications that people looking to buy, or rent homes, have been seeking information on risks.

When Tower provides quotes for house insurance, it tells people how it rates natural hazard risk on the properties quoted on.

The Post Reported last week that around 2000 people were accessing its flood maps online every day, and some house buyers have been using Tower’s online quote function to check the insurer’s view of the hazard risk on homes they are considering buying.

Tower chief executive Paul Johnston said Tower’s risk-based pricing model used detailed data and analytics to assess the likelihood an individual property would be impacted by a certain type of weather event or natural disaster, and the estimated cost of repairing damage.

He said risk-based pricing aimed to remove cross-subsidisation so that customers only paid for the risks their homes faced, not anyone else’s.

“Like most Kiwi, we believe people should only pay for the risks that apply to their homes, not someone else’s,” he said. “Expanding our risk-based pricing model is a fair and transparent way to support this.”

Tower launched riverine flood risk-based pricing in 2021, and its moves have been recently followed by IAG, owner of the State, NZI and AMI brands, and Suncorp NZ, owner of the Vero brand and majority owner of the AA Insurance brand.

A report in July by the Independent Research Group into climate adaptation, which included Suncorp NZ chief executive Jimmy Higgins, said New Zealand was under-prepared for the impacts of climate change it was already experiencing.

It also said the taxpayer could not continue to keep funding property buyouts after natural disasters, as happened in the Red Zone in Christchurch following a series of devastating earthquakes, and in Auckland following 2023 flooding.

However, Octopus Group found just under a third (32%) of homeowners had spent money on adapting their homes in preparation for a changing climate.