Why is my house insurance premium so high?

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House insurance premiums have been jumping up around the country – by an average of over 22 percent in less than a year, putting the pinch on those on fixed incomes. So why is it increasing so much? And what can we do about it?

Insurance Council of New Zealand chief executive Kris Faafoi acknowledges it’s a hard time financially for Kiwis currently.

“We know it’s difficult for Kiwis dealing with the cost of living,” he says.

Kiwis have a high level of insurance cover by international standards – with about 96 percent of us having residential insurance.

“There are a number of drivers of premium levels, some of which are out of our control, such as building cost inflation, rising global reinsurance costs and the impacts of last year’s severe weather events,” Faafoi says.

Research from consultancy company Finity prepared for Treasury and released under the Official Information Act, shows that between September 2022 and July 2023 the total increase in the gross average cheapest residential insurance premium across the country was $321 or 22.6 percent.

Faafoi says premiums tend to trend higher after large-scale events, as was seen in the case of the Christchurch and Kaikoura earthquakes.

“We are going through this now post Cyclone Gabrielle and Auckland Anniversary Weekend,” he says.

Like all Kiwis, Faafoi is hoping for a quieter period with fewer events so that prices can stabilise, and the premium increases ease off. And there does appear to be light at the end of the tunnel.

“For example, some of the wider pressures on premiums are showing signs of slowing or are expected to ease back, including building cost inflation and reinsurance rates,” he says.

Last year’s weather events have highlighted the importance of New Zealand investing in resilience measures such as flood protection to protect lives and property and to help keep insurance affordable and accessible, Faafoi says.

So, what can we do?

Insurers are looking at ways to help their customers manage their cover to protect themselves and their homes as cost-effectively as possible, Faafoi says.

This includes adjusting their excess or other policy settings.

“People should take the opportunity to contact their insurer and see what’s available while also shopping around,” he says.

Insurance companies look at properties on a case-by-case basis and even with the same information can take different positions depending on their risk appetite.

So, ask your insurer whether you can up your excess to reduce your premium, or what else you could do to make it more affordable, and check out what the wider market has to offer.

Faafoi highlights a bigger issue at play too, as climate change means the prospect of more frequent and severe weather events.

“It’s also important that New Zealand takes a long-term view on the risks from flooding and other natural hazards on peoples’ homes,” Faafoi says.

“This is not an insurance issue alone and requires central government, councils, and others to work together around natural hazards risks to ensure insurance is affordable and available in the future.”

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