With thanks from Bridges Insurance & Rothburys
2022 renewals for house insurance premiums are the biggest increases for many years, but it is important that you have full cover in place so that you aren't facing a large shortfall if you need to claim. [For more articles on house insurance, go to our blog and search for house insurance].
There are a number of reasons that premiums have increased this year, we will step through them.
1. EQC (Government Earthquake Commission Levy). From 1st October 2022, the coverage has doubled from $150,000 + GST to $300,000 + GST per house, which in turn has increased the levy from $300+GST to $480 + GST. This levy applies to every house that is insured in New Zealand. The rationale behind this was to move some of the high insurance costs away from the high-risk regions such as Wellington & Hawkes Bay and spread the cost more proportionally across the country.
2. Inflation. Yes, insurers are increasing the costs in line with inflation, but also to meet the cost of paying claims.
3. Claims Incidence. New Zealand has had a record number of weather events over the last 5 years, more weather events means more claims.
Climate Change is becoming a very real risk to insurers and as such, they are having to review their pricing models to ensure that properties in coastal and other event-prone areas are being rated appropriately to ensure that insurers have the financial resources to continue to pay claims arising in these areas.
The effect of climate change across the insurance industry is clear. 2021 was a record year for insurance claims from extreme weather events and natural hazards with $324 million paid out in claims. The total cost of claims year to date (January to June) have reached $198 million.
The Insurance Council of New Zealand reported that New Zealand has experienced more than 150 severe weather events and natural disasters since 1968.
4. Rising construction costs.
The construction industry continues to face rising costs, impacting rates for home insurance policies and increasing sums insured. The annual price increase for the construction of new dwellings hit a 37-year high in the March 2022 quarter, with a 18% increase as reported by Statistics New Zealand.
This is being accelerated by higher labour costs, material shortages and supply chain issues. The global impact of Covid-19 on supply chains has flowed through into the insurance industry and this means insurers are experiencing delays when it comes to receiving goods sourced from overseas, such as building materials.
How you can help to make sure that your insurance will work when you need it:
Make sure that your policy details are correct, the m2 area noted is correct, that the property occupancy is current and consider your current policy excess.