A new report from Consumer NZ warns that home insurance is becoming unaffordable for many New Zealanders. The report also states that rising climate risks could make coverage hard to find in some parts of the country.
Insurance premiums have skyrocketed. According to Stats NZ, the cost has risen 916% since the year 2000.
Many households are now dropping their coverage. In 2022, 7% of households went without insurance due to cost. That number is predicted to rise to 17% by 2025. For many, insurance is now a top financial pressure, behind only housing, food, and debt.
The report found low public trust in insurance companies. People are frustrated by slow claims, settlement delays, and unclear pricing.
A major issue is “risk-based pricing.” Many policyholders cannot see the data used to set their premiums. This makes it difficult to question the cost. It is also hard to compare policies online, especially for high-risk homes.
Consumer NZ also noted that insurance company profits have rebounded. This is despite large payouts for recent weather events. Trans-Tasman insurers appear to earn higher margins in New Zealand than in Australia.
Calls for Action and a Worsening Climate
The report recommends several actions. It suggests the government create a national climate adaptation plan. It also calls for more scrutiny of insurance pricing.
Consumer NZ wants the Financial Markets Authority to check if premiums are fair. It also wants the Commerce Commission to study competition in the sector.
For insurers, the report recommends clearer communication. Companies should better explain how risk affects prices and improve how they handle claims.
Another proposal is to expand the role of the Natural Hazards Commission (NHC). This would allow it to provide flood coverage and protect at-risk communities.
Stronger Storms Forecast
The insurance report was released with new climate research. The study, from Earth Sciences NZ and the University of Waikato, used advanced modelling.
It found that rainfall from tropical cyclones could increase by up to 35% by 2100 if emissions remain high. While the number of storms may not rise, their strength will. The most severe cyclones (Category 4 and above) will become more common.
This is because a warmer atmosphere holds more moisture. This leads to more intense rainfall and stronger winds during storms.
Recent events like Cyclone Gabrielle and the Auckland floods caused an estimated $14.5 billion in damage. Insurers paid out $3.8 billion in claims.
A Global Trend
This trend is not unique to New Zealand. A separate global review projects insured losses will again exceed US$100 billion in 2025. This would be the seventh year in a row above that threshold.
Major events this year include wildfires in Los Angeles, Japan, and South Korea. The US has also seen record tornado activity. Australia recently had its first cyclone landfall near Brisbane in fifty years.
An active North Atlantic hurricane season is also forecast. This is adding to concerns about high worldwide disaster losses.
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