Changes to Home Insurance Premiums

As the frequency of the extreme weather events increase, the frequency of insurance claims increases simultaneously. It follows that if insured losses from extreme weather events continues to grow, insurance premiums will also continue to grow.

According to the Insurance Council of New Zealand*, claims from the 2023 Auckland Anniversary floods and Cyclone Gabrielle are expected to cost the New Zealand insurance industry $3.75 billion. This significant cost has caused reinsurers to adjust their views on New Zealand’s risk, resulting in insurers facing higher reinsurance premiums over the past year.

Insurers are now looking at other ways to cover the increasing costs of extreme weather events. For example, insurers are implementing a greater use of risk-based pricing for home insurance. This means that the value of insurance premiums will be more tailored to the specific risks a property faces (e.g. seismic or flood).

Increasing costs for residential construction are being seen nationwide. Construction costs rose by 0.5% nationally in the third quarter of 2023, and the annual growth rate was 3.4%, according to Cordell Construction Cost Index. ***

So, what does this mean for your insurance? 

Your sum insured calculation is based on how much it’s likely to cost to fully rebuild your home in case of total loss. It’s important to check regularly (at least annually) that your sum insured is up to date to ensure your home is adequately insured. To help set the right sum insured, there are several options including:

• Using the Cordell Online Calculator, an online rebuilding calculator
• Obtaining a registered valuation for insurance purposes
• Rothbury have partnered up with Construction Cost Consultants who can offer Rothbury clients a rebuild valuation from just $599 (including GST) in the North Island and from $749 (including GST) in the South Island (valuations are valid for two years). Your broker can arrange this for you.

To help manage insurance affordability, many homeowners may reduce their coverage through higher excesses and/or reducing their sum insured, although this could leave them more exposed when facing a total loss event.