Source: Radio New Zealand
Insurance Council chief executive Kris Faafoi
The Insurance Council says although one insurer has stopped offering home policies in some South Island towns, it’s not an industry-wide issue.
RNZ has revealed that the company had halted new home, business and landlord insurance policies in the West Coast town of Westport, due to the high flood risk the town faces.
The insurer had also stopped offering new policies in the north Canterbury township of Woodend, along with Rolleston and Lincoln, RNZ reported.
It has also emerged AA has a blanket exclusion for new policies in Blenheim, with several residents contacting RNZ about the issue.
In a statement, AA Insurance told RNZ the temporary restrictions were in place because the company has reached the maximum level of exposure to seismic risk it can take on in the areas.
Meanwhile, the government has launched a probe into high home insurance costs.
Insurance Council chief executive Kris Faafoi told Morning Report AA had made the “difficult decision” not to issue new policies, due to its current exposure.
“It’s only one insurer – it’s not an industry-wide issue. They’re obviously making a business decision based on the exposure they’ve seen with customers in one particular area.”
He said customers needed to shop around and other insurers were already picking up the business in the affected areas.
He denied the country had reached “a tipping point” with insurance because of its natural hazards, including seismic risk, and the impact of climate change, however, insurers had been warning for soe time of the higher risks the country was facing.
“The risk of events becoming more severe and more frequent is real and as a country we need to deal with that, not just to protect communities from the kinds of damage that has been caused over the last couple of weeks but also to keep insurance accessible and affordable over the long term,” Faafoi said.
He welcomed the government review of insurance costs. Many people would not realise that 40 percent of the cost of premiums was due to taxes and levies.
Treasury has highlighted that insurance companies were more profitable in this country than in Australia.
Faafoi responded that New Zealand had a high risk profile – it was the second highest in the world, according to Lloyds Premiums, and this had a flow-on effect, he said.
In 2023 insurers had a $4 billion exposure to events such as Cyclone Gabrielle and the Auckland anniversary weekend floods for private customers, so they needed to ensure they had strong balance sheets.
There were peaks and flows around insurance payouts relating to major events and hopefully premium prices were starting to stabilise.
There were 22 members of the Insurance Council, so it was a competitive environment and customers had choices.
On the review, Faafoi said: “It’s a pretty short and sharp review … The government wants to work with the insurance industry to get an understanding of the drivers of premiums and we welcome that.”
The council hadn’t heard what was required as yet but was keen to cooperate.
Sign up for Ngā Pitopito Kōrero, a daily newsletter curated by our editors and delivered straight to your inbox every weekday.
– Published by EveningReport.nz and AsiaPacificReport.nz, see: MIL OSI in partnership with Radio New Zealand
