State and AMI house insurance policyholders with homes at heightened risk from earthquakes, landslips and floods have been told to brace for a rise in premiums.
The move follows Tower’s decision earlier this year to start individually pricing earthquake risk on homes instead of sharing the risk evenly across all its policyholders.
IAG, the Australian sharemarket-listed company which owns State and AMI said the average rise in premiums for people with homes in areas exposed to heightened risk of earthquake or flood was $91.
But “a handful” of customers could expect increases or decreases of around $1000, the insurer said.
AMI and State policyholders would individually learn what their premium rise or fall will be when their annual renewal notices come through, some as soon as next week.
Three-quarters of AMI and State policyholders would see their premium rise, averaging $91 a year.
The remaining quarter of State and AMI policyholders would see their premium fall, on average by $54 a year.
Overall that means IAG will collect a larger total premium haul on its AMI and State house insurance portfolio as a result of the changes, but the company blamed that on an increase in weather-related claims.
When Tower made the change to individual risk-based pricing for natural disaster cover, its chief executive Richard Harding predicted IAG and Suncorp (which owns Vero) would follow suit.
Harding said 2.5 percent of its policyholders would face hikes of more than $250, while 1 percent would see a hike greater than $2000.While some policyholders at AMI and State will see premiums hiked, IAG has decided not to do the same for policyholders with NZI, a business it owns which sells house insurance through insurance brokers, but that could change.
The areas where some State and AMI policyholders would see rises include parts of Whakatāne District, Hawke’s Bay, Wairarapa, Greater Wellington, Marlborough, the West Coast, Kaikōura, Waimakariri District and Dunedin.
While they are going to pay more, house insurance policyholders in other parts of the country, including the rapidly-growing Auckland market would see their premiums fall.
Other areas where premium drops are expected are parts of the upper North Island, Taranaki, Selwyn District, North and Central Otago and Southland.
Customers in other parts of the country were expected to see average decreases in their total premium of $54, said Kevin Hughes, executive general manager consumer at IAG.
“We know New Zealand has many natural hazards, including earthquakes and floods, with different risks in different regions. In the past, the price people pay for home insurance hasn’t fully reflected these differences in risk. This is now changing,” Hughes said.
“Over the past few years, we’ve seen how New Zealand’s environmental risks have evolved, and we’re taking these risks more into account. While we can’t ignore these changes, we can continue to be there for our customers when misfortune strikes. This means our prices must change.”
“Generally, a home in a location which is a high-risk area for earthquakes or floods will cost more to insure than a like-for-like home in a lower risk location.”
IAG suggested customers consider reducing their insurance cover by lifting their excess levels, or even buying more policies from the company.
“We know that, for some of our customers, this will be a challenge and we’re committed to working with them through this,” said Hughes.
Note: This article is from Stuff, see https://www.stuff.co.nz/business/money/105689662/ami-and-state-house-insurance-policyholders-brace-for-rising-premiums