Increases in home insurance premiums are affecting all New Zealand homeowners.
Here’s 3 reasons why.
Increased extreme weather events
What does this mean?Increased extreme weather events
Climate change is having a very real impact on the lives of New Zealanders
It's clear that as the frequency and severity of extreme weather events intensifies, climate change is becoming one of the biggest challenges facing the insurance industry.
We’ve seen two devastating extreme weather events in 2023 already, the Auckland Anniversary floods and Cyclone Gabrielle. These two events are currently estimated to cost the insurance industry NZ$3.18 billion(1).
The price you pay for your insurance needs to accurately reflect what it costs the insurers to provide cover. As the total cost of claims continues to increase, this means insurance premiums increase too.
1Insurance Council of New Zealand
Image data source: Insurance Council of New Zealand
Floods & Cyclone Gabrielle may change the face of insurance in NZ
It is likely that as an outcome of these events there will be some hard decisions about where homes are allowed to be built in the future. For existing homes, insurance providers will be looking at ways to cover the increasing costs of extreme weather events. This may include:
- Greater use of risk-based pricing, where insurance premiums paid by owners of flood-prone homes are typically higher compared to people with homes in lower risk flood areas.
- Limiting the availability of flood cover in some areas.
Affordability and availability of cover
We recognise affordability and availability of cover may become challenging in the future. Our brokers are here to recommend insurance solutions to best protect your assets while also securing the right combination of cost, risk, and coverage.
Snapshot of recent claim costs
Changes to the Earthquake Commission Cover
What's changed?Changes to the Earthquake Commission Cover
From 1 October 2022, the Earthquake Commission (EQC) natural disaster cover increased from $150,000 to $300,000 - so the amount payable to the EQC by way of levies has increased by $180 per household, regardless of where you live in New Zealand.
Previously, high seismic areas such as Wellington, Canterbury and Hawke's Bay carried a larger share of the insurance premium. Now, some of these costs have been redistributed to areas where there is lower earthquake risk to help share the load.
Supply Chain & Economic Factors
What’s happening?Supply Chain & Economic Factors
Factors affecting the wider New Zealand economy are impacting the insurance market too. These supply chain and economic factors are contributing to the increasing cost of insurance premiums.
Supply chain
While shipping, freight and logistical disruption have largely subsided following COVID-19, the costs for these services remain high. Shipping prices have increased more than six-fold according to the Ministry of Foreign Affairs and Trade.1
This has an inflationary impact on the cost of building materials and replacement equipment.
Significant increases in construction costs
Increasing costs for construction and equipment are being seen across the industry. Labour costs in this sector have increased by 29% since 2019.2
Overall, prices for building a new house increased by 8.5% in the 12 months preceding March 2023. 3
Inflationary pressures
Annual inflation in New Zealand remained high at 6% in the June 2023 quarter with food being the largest contributor, according to Statistics New Zealand. 4
1TMX Global
2Statistics New Zealand (live.com)
3CoreLogic, New Zealand’s Cordell Construction Cost Index
4Statistics New Zealand
Increased extreme weather events
Climate change is having a very real impact on the lives of New Zealanders
It's clear that as the frequency and severity of extreme weather events intensifies, climate change is becoming one of the biggest challenges facing the insurance industry.
We’ve seen two devastating extreme weather events in 2023 already, the Auckland Anniversary floods and Cyclone Gabrielle. These two events are currently estimated to cost the insurance industry NZ$3.18 billion(1).
The price you pay for your insurance needs to accurately reflect what it costs the insurers to provide cover. As the total cost of claims continues to increase, this means insurance premiums increase too.
1Insurance Council of New Zealand
Image data source: Insurance Council of New Zealand
Floods & Cyclone Gabrielle may change the face of insurance in NZ
It is likely that as an outcome of these events there will be some hard decisions about where homes are allowed to be built in the future. For existing homes, insurance providers will be looking at ways to cover the increasing costs of extreme weather events. This may include:
- Greater use of risk-based pricing, where insurance premiums paid by owners of flood-prone homes are typically higher compared to people with homes in lower risk flood areas.
- Limiting the availability of flood cover in some areas.
Affordability and availability of cover
We recognise affordability and availability of cover may become challenging in the future. Our brokers are here to recommend insurance solutions to best protect your assets while also securing the right combination of cost, risk, and coverage.
Snapshot of recent claim costs
Rothbury are here to help in any way we can to protect your home and most valuable assets.
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