The rising cost of house insurance is concerning many New Zealanders.
A recent survey by Consumer NZ found half of respondents were worried about the cost of insuring their homes.
Alarmingly, 7 per cent of people without house insurance either cancelled or didn’t renew their policy because of cost. For those without contents insurance, 17 per cent didn’t renew their policy for that same reason.
“Insurance provides a crucial safety net,” said Rebecca Styles, Consumer NZ’s investigative team leader.
“With the cost of living squeezing many households, some New Zealanders have effectively been priced out of insurance protection.”
According to Consumer Price Index (CPI) data, the cost of house and contents insurance has increased by 150 per cent over the past 10 years.
Consumer’s premium price survey found standard-sized houses in Hamilton have been hardest hit by insurance premium hikes.
“The cost of insuring a standard house in Hamilton has increased by a whopping 17 per cent compared to this time last year,” said Styles.
“Over the past year, the cost has increased by 15 per cent in Auckland, and by 14 per cent in Dunedin.”
“Last year’s survey found Wellington was the most expensive region to insure a standard and large home. However, this year, price hikes for insuring Wellington’s homes are relatively modest compared to other regions – up 5 per cent for a standard house and 9 per cent for a large house.”
What’s driving the price increases?
From October 1 this year, the Earthquake Commission (EQC) levy, which is paid with insurance premiums, rose from $345 to a maximum of $552.
This increased levy pays for a higher building cap. Essentially, this means EQC will cover the first $300,000 worth of damage caused by earthquakes, tsunamis, volcanic eruptions, hydrothermal activity and natural landslips. Previously EQC would only cover the first $150,000.
The increased building cap means the Government is taking on more risk than private insurers.
Last year, Dr David Clark, the Minister for the Earthquake Commission, said the increased cap should lead to reduced premiums for many New Zealanders. However, Consumer’s research has shown median price increases across the regions.
“We found the median costs increased between 5 and 17 per cent since this time last year,” said Styles.
Customer satisfaction low
Aside from eye-watering price hikes impacting policy holders, Consumer’s insurance customer satisfaction survey found lacklustre performance when it comes to insurers keeping their customers satisfied. There are a few exceptions.
“The Medical Assurance Society (MAS) and FMG (previously Farmers’ Mutual Group) rated highly for customers with house and contents insurance.
“MAS and FMG got top scores for price, customer support and value for money.”
MAS and FMG are winners of Consumer’s People’s Choice awards for house, contents and car insurance.
Three banks stood out for below-average performance in the house and contents insurance area: ASB, BNZ and Westpac.
“A review of the insurance industry to ensure it is competitive and working for households is well overdue,” said Styles.
