Wellington Mayor concerned for insurance premiums rise

News 01/05/2019

Wellington Mayor Justin Lester is concerned by insurer IAG's decision for its premiums to take greater account of nature and severe weather-related risks for some homes.

Changes announced earlier this week mean from July 1, customers who live in some areas prone to natural disasters or severe weather events may have to pay increased insurance premiums. Those in less prone areas could pay less.

The changes will be communicated to customers throughout the course of the next 12 months.

It comes after the Government made changes to the level of cover the Earthquake Commission (EQC) provides in relation to damage to homes and contents from natural disasters.

But IAG's changes concern Lester due to Wellington's susceptibility to earthquakes and coastal location. IAG provides insurance to roughly 50 percent of people in Wellington.

He is calling for a forum with relevant stakeholders to understand the situation.

"I will sit down with IAG, we want to talk to Earthquake Commissions Minister Megan Woods."

We want to bring together all the players, all the stakeholders, and just find out what's going on

He goes on to say he want to know "what the future of insurance is in New Zealand, but in particular for us here in Wellington," he told The AM Show.

He said many Wellingtonians saw dramatic premium price increases, often of more than 100 percent, after insurer Tower changed to a more risk-based assessment model.

While Lester said they could change providers away from IAG, he is worried other providers may take up a similar model.

"They could move to other providers, they could have different steps, but if we have all providers move to this model, then that is a huge risk for our city.

We just need to make sure the insurance model is working appropriately.

He said the changes may mean fewer people across New Zealand move or buy houses as they could not afford the increased prices.

"With sea level rise and climate change, storm surge is going to be a huge risk. Almost all of our towns and cities are on the coastline.

"We don't want a situation where we have got everyone facing increased premiums or not being able to get insurance, and therefore not being able to get a mortgage."

Wellington's Chamber of Commerce chief executive John Milford says insurance premiums can't just continue increasing.

We all know about climate change and resilience.

"So I think it is an issue that needs to be front and centre about what solutions are we going to see because we can't just increasing the costs," he told Newshub.

But there could be a silver lining to the announcement. Milford said it may give other providers an opportunity to gain more customers.

"There is a view that the other 50 percent may see this as an opportunity to hold their prices and gain market share, which we would welcome."

Competitiveness is always good in any market.

IAG executive general manager of customer and consumer Kevin Hughes said everyone will be affected differently depending on their property.

"We realise these changes will be a challenge for some customers and we will work through this with them.

"There are a range of options available to customers to make this easier, including taking a higher excess or adjusting the frequency of payments to suit them."

Customers of IAG's brands, including AMI, NZI and State, will be affected. People with insurance through banks that IAG provides for - such as ASB, BNZ, The Co-Operative Bank and Westpac - will also be affected.

The AM Show / Newshub reporter Jamie Ensor