September 2023
Read Time: 4 Minutes
The insurance market is now split into two. Simple or safer insurances are easier to get in local markets, but prices are rising. For insurances related to catastrophes, hard-to-insure properties, or bad loss histories, prices are really going up. Also, if the value of what you're insuring goes up, the price for insurance goes up too.
In New Zealand and Australia, the cost of damage from weather events, like floods, is making it harder for local insurers to offer as much coverage. Some insurers are also getting less coverage from their own insurers, called reinsurers, even as the cost of this reinsurance goes up.
Getting insurance for flooding is a growing worry. The Government and local councils have recently put in place land zoning for areas affected by the floods in 2023. This has big implications for homeowners in flood-prone zones.
Most insurers are now saying no to new coverage for homeowners in the highest-risk categories. While they might consider renewing existing policies, these customers can expect stricter underwriting and more limiting policy terms and conditions.
For those at higher risk of flooding, insurers are adding special terms to policies. These generally relate to:
For some types of insurance, multiple insurers might need to work together to offer full coverage. Insurers are also being extra careful with insurances that involve weather risks, like floods. This is causing prices to rise and deductibles to go up. In some cases, coverage for these risks is being limited.
The Auckland Anniversary Weekend floods and Cyclone Gabrielle were really big weather events in New Zealand's recent history. They caused a lot of losses for businesses, farms, infrastructure, and homes. This comes on top of two years of increased number and severity of natural disasters, big commercial fires, and rising claims costs due to inflation and problems with supply chains. All these events have made reinsurance more expensive worldwide, including in New Zealand, as reinsurers raise their prices and reduce coverage.
Before the Auckland floods and Cyclone Gabrielle, it was expected that insurance prices would rise about 10%. After these events, one major insurer announced in March 2023 that starting from April, they'll need to increase their prices by 20% for renewals and new business. For higher-risk jobs or poor-performing insurances, they may need to raise prices by more than 20%. If a property's insured value goes up after a valuation, some insurances might need additional support for full coverage.
In a nutshell, the price of insurance needs to reflect the cost for the insurer to provide the coverage. Because of the cost of recent events, insurance prices are going up and the amount will depend on factors like location, risk, and loss history.
More and more, insurers are needing up-to-date valuations for insurance, especially for buildings, to make sure the insured value is correct. If a new valuation is done, it should be ready well before the insurance renewal date.
It's really important to check that your insured value is correct. If you've made changes to your building or other assets, you'll need to update your insured value. The reason for the rise in insured values is because it's taking longer to repair damaged property due to supply chain problems. This is affecting the price of building materials and replacement equipment, whether that's machinery or goods. This could lead to underinsurance, which is a worry. It's really important that the Body Corporate checks their property's insured value and gets an insurance valuation every year.
From 1 October 2022, the maximum amount the Earthquake Commission (EQC) will cover for residential building damage increased from $150,000 to $300,000 per home/unit (excluding GST). From 1 October 2022, EQC covers the first $300,000 of damage from earthquakes, tsunamis, volcanic eruptions, geothermal activity, and natural landslips, and increased the charge per unit/home from $300.00 to $480.00. Private insurers cover damage above the EQC limit.
Call 0800 CROCKERS or Call 0800 2762 5377
