Melissa Heath thinks her message to New Zealander homeowners is a scary one. She suggests we might all need a cup of tea and a stodgy muffin after hearing it.
The former insurance manager, who specialised in post-quake disaster recovery, says insurance in New Zealand is changing rapidly and too many homeowners aren’t aware.
Those who’re receiving stonking great bills from their insurance providers will know about it.
Heath says she knows of one home in Fendalton which now costs an extra $15,000 to insure, and she’s heard of $12,000 and $5,000 increases in other regions.
She says the reason for the increase is a change by insurers to risk-based pricing.
“Risk-based pricing means if you buy a dodgy, risky home you take on the entire risk for that property, it’s no longer shared in the community,” says Heath.
With that in mind, will premiums reduce for homes deemed to be in low-risk areas? Heath crosses her fingers, “here’s hoping”, she says.
According to Heath, it was the Canterbury earthquakes which changed everything. So far, claims for the series of seismic events have cost private insurers & EQC $32 billion.
Heath says that cost has led to reinsurers re-examining New Zealand’s risk exposure to natural disasters. As a result some insurance companies have begun pricing for seismic risk, and set to begin analysing flood risk and the effects of climate change.
She’s urging homeowners to think carefully about the risks associated with where they live, where they buy and where they build. And she’s hoping New Zealanders will become more insurance literate.
Heath has set up her own risk profiling company but says the majority of her work is unpaid - speaking publicly and offering advice to interested parties in the financial and property sectors.
“Because insurance in New Zealand has always been a given and has always been such a low issue,” says Heath, “people don’t think about it; they don’t do the necessary research which is now essential.”
So, in a market where insurers are seemingly able to charge what they like, who’s monitoring their behaviour?
Heath says the Reserve Bank monitors them from a prudence perspective while the Financial Ombudsman keeps watch over behaviour.
“There’s also the Fair Insurance Code” she adds, “which all insurers sign up to and has an external resolution system.”
Heath is also concerned about the high rates of under-insurance in this country. Treasury has estimated up to 85% of homeowners are under-insured.
Heath says she saw it first hand after the Kaikoura earthquake, when she led a team of assessors for IAG. She says some homeowners had only insured their home for the value of their mortgage.
She wants us all to be better prepared for the next disaster, whenever and wherever that may be.