By Rebecca Styles
Research Lead | Hautū Rangahau
Will you be able to afford and access home insurance in the next 10 years? Our in-depth report found the answer could be no, unless the government takes the lead in developing an effective climate adaptation framework.
We’re also calling on the Commerce Commission to investigate whether there’s enough competition in New Zealand’s insurance market, and for the Financial Markets Authority to check risk-based pricing is being applied fairly.
Here’s what we found isn’t working for the house insurance market.
Concerned? Read the full report for more in-depth insights: Will you be able to get home insurance by 2035?
1. It’s expensive
Since 2000, the cost of house insurance in this country has increased 916%, according to Stats NZ consumer price index data.
Our own research is showing a trend of customers dropping their house insurance policies because of cost. In 2022, of those policyholders who dropped house insurance, around 7% had done so due to cost. This year, that percentage climbed to 17%
Our recent research also shows that the cost of insurance has risen to be the fourth most pressing financial concern for New Zealanders, behind housing, food and overcoming household debt.
2. It’s hard to shop around
It’s also getting harder to shop around for insurance, because of the difficulties in comparing policies, the lack of real choice of providers and the fact that, in some areas, consumers can’t get quotes online. Plus, if a homeowner has had a significant natural hazard affecting their property, insurers may no longer want their custom.
3. More risk-based pricing is on the way
Just last week, Tower announced it was rolling out more risk-based pricing.
For a small number of properties (30 homes), Tower will no longer insure them because of the risk.
For another 15,000 customers, premiums will rise. For half of those, increases will be between $100 to $300 a year, while for 3,000 customers, it will be a lot more. So much so that Tower will phase in the price increases over four years.
We think this is a sign of insurance retreat in Aotearoa.
To understand what insurance retreat means, and how it’s starting to happen here, see our recent deep dive into the house and contents insurance market Will you be able to get home insurance by 2035? (page 35).
4. The data behind risk-based pricing isn’t transparent
There’s no standardised way of measuring risk amongst New Zealand insurers.
This inconsistency could lead to some properties being incorrectly assessed and homeowners unfairly charged higher premiums.
There’s also no avenue for customers to contest premium prices, other than shopping around. Historically, New Zealanders have had low rates of switching insurance provider. In some instances, they will be unable to find another insurer to cover their home because of its risk rating.
We think there needs to be an avenue for customers to contest risk-based premium prices. As well as a move to standardise the data premiums are based on.
5. Insurers need to do better managing claims
The Financial Markets Authority (FMA) recent report on how insurers responded to the 2023 North Island weather events found a number of areas where insurers could improve on customers’ claim experience.
The FMA recommended insurers provide customers with clear expectations about how long claims would take. They should also advise who else is likely to be involved in the claims, such as loss assessors and builders.
It also recommended better systems to regularly inform customers about the progress of their claims, such as a customer portal, and making sure enough staff were available at times of high claims.
Is there anything you can do to get a better deal?
While we think the market needs to change, there are a few levers you can pull to try to get a better deal in the meantime. Check out our 8 ways to save on insurance.
