The government has promised to look closely at the rise of risk-based pricing for property insurance, and has challenged insurers to “be smart” and “make the best decisions for customers.”
Speaking at yesterday’s ICNZ conference, finance minister Grant Robertson said he was “concerned” about the rise of risk-based pricing in the property insurance market, a trend which is reducing the availability and affordability of insurance in higher-risk regions. He said that a lower level of insurance could “severely hamper” recovery efforts in the event of a disaster, and that insurers should be looking carefully at how they manage their premiums going forward.
“These trends continue to reduce the coverage of property insurance,” Robertson said.
“They reduce the effectiveness of managing the cost and impact of natural hazards, and severely hamper the speed of recovery from events. I would hate to imagine the recovery of Christchurch if we hadn’t had such high rates of insurance coverage.”
“The government is currently investigating pricing and access issues in property insurance markets, and the drivers behind those changes,” he explained.
“In a lot of cases, premiums have doubled, tripled or even quadrupled. In some cases, cover has almost been impossible to find. All of this may be for legitimate reasons, but that is far from clear to body corporates and apartment owners.”
Robertson, who is also MP for Wellington, says the city’s homeowners have been particularly disappointed to learn that their efforts to bring their homes up to the current NBS Code make no difference to their premiums – a misunderstanding which is down to a lack of clear information. He said the onus was now on insurers to clearly communicate to customers their scope of cover, their premiums, and what risk-based pricing will mean for them.
“We need to make sure that we give New Zealanders the confidence that that property insurance market will work in their interest,” he stated.
“We want the markets to promote risk reduction while also supporting insurance availability and affordability, resilience over the long term, better information for consumers and improving our preparedness for future risks.”
“If you can’t insure a property, you’re not going to get a mortgage,” Adrian Orr, who also spoke at the conference, added.
“Financial stability then starts to really change in nature. We’re saying [to insurers] – be smart, make the best decisions and earn your customers, but at the same time, you’d better be explaining very clearly to your customers what that means for them.”