Replacement house insurance cover

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349 posts

Ultimate Geek

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#972483 22-Jan-2014 20:56

I have insurance for my house in kapiti with FMG for full replacement. I have a rental property with MAS in Wellington which has full replacement. FMG wouldn't offer replacement for central wellington (a month ago when I asked the question).

My FMG policy was cheaper than ASB & BNZ when I got quotes. MAS was pretty much the same. FMG must be increasing their market share heaps.

mattwnz

20173 posts

Uber Geek

#972485 22-Jan-2014 21:28

timmmay: Instead of working around the new system you could get a registered valuer to work out rebuild cost. My rebuild cost is more than the house value, due to things like clearing the site, and the online calculators were far too low. A valuer cost me around $875 for both market and replacement valuations, fairly expensive I know but you don't really have much choice.

The problem is cost of the valuer, plus the rebuild costs will likely raise the premium by a lot. Whereas with the older replacement cover, the price you paid I beleive was based on the RV. The RV however is consider the market value of the house, rather than the rebuild cost, which will very likely be a lot more. Insurance companies must now be creaming it.

mattwnz

20173 posts

Uber Geek

#972487 22-Jan-2014 21:33

JamjarsNZ:
mattwnz:
Geektastic: FMG I believe. MAS also but only if you are a doctor or a dentist.

We stayed with NZI but I just told them I wanted cover for $1 million rebuild costs.

I believe FMG will only do it for houses in rural areas.

Nope, I'm with FMG and live in Rolleston. My insurance was about $60 more than what AMI quoted me but with a reduction in excess from $400 to $250.

That is fairly rural area. Small rural towns are usually covered by them.

mattwnz

20173 posts

Uber Geek

#972488 22-Jan-2014 21:35

jonathan18:
mattwnz:
Geektastic: FMG I believe. MAS also but only if you are a doctor or a dentist.

We stayed with NZI but I just told them I wanted cover for $1 million rebuild costs.

I believe FMG will only do it for houses in rural areas.

No, FMG certainly provide replacement cover in urban centres - we're in Palmerston North and have replacement cover through them. I remember receiving a newsletter last year clearly stating they had no intentions to switch to agreed value policies - long may this continue. IIRC the argue their rural orientation means they don't have carriy the same risk profile as other insurers, eg wouldn't be so badly affected by earthquakes such as the Chch ones.

Re premiums - when we joined FMG it wasn't for their replacement cost house insurance (but is a key reason why we will continue to insure through them), but that their premiums were highly competitive - considerably cheaper than any other company I got quotes from.

But you would have already have been insured with them before the changes, right? I was talking about new policies. I believe they are still doing it for small towns too.

benmurphy66

349 posts

Ultimate Geek

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#972489 22-Jan-2014 21:36

mattwnz:
jonathan18:
mattwnz:
Geektastic: FMG I believe. MAS also but only if you are a doctor or a dentist.

We stayed with NZI but I just told them I wanted cover for $1 million rebuild costs.

I believe FMG will only do it for houses in rural areas.

No, FMG certainly provide replacement cover in urban centres - we're in Palmerston North and have replacement cover through them. I remember receiving a newsletter last year clearly stating they had no intentions to switch to agreed value policies - long may this continue. IIRC the argue their rural orientation means they don't have carriy the same risk profile as other insurers, eg wouldn't be so badly affected by earthquakes such as the Chch ones.

Re premiums - when we joined FMG it wasn't for their replacement cost house insurance (but is a key reason why we will continue to insure through them), but that their premiums were highly competitive - considerably cheaper than any other company I got quotes from.

But you would have already have been insured with them before the changes, right? I was talking about new policies. I believe they are still doing it for small towns too.

I took my FMG & MAS policies out in the mast 6 weeks.

JamjarsNZ

63 posts

Master Geek

#972496 22-Jan-2014 21:46

mattwnz:
JamjarsNZ:
mattwnz:
Geektastic: FMG I believe. MAS also but only if you are a doctor or a dentist.

We stayed with NZI but I just told them I wanted cover for $1 million rebuild costs.

I believe FMG will only do it for houses in rural areas.

Nope, I'm with FMG and live in Rolleston. My insurance was about $60 more than what AMI quoted me but with a reduction in excess from $400 to $250.

That is fairly rural area. Small rural towns are usually covered by them.

I personally wouldn't call Rolleston rural, it is not in a rural post zone, suppose everyone would have their own definition of a rural town.

Anyway, I work for CRT/Farmlands and we have a very close relationship with FMG. I know they will consider any house anywhere for replacement cover, like some one else mentioned, they can get away with it because most of their customers are rural so in a catastrophic event the risk is spread around a lot more and not centered in the major urban areas.

If you are a CRT/Farmlands card holder you can get a 2% rebate if you pay the premiums with your CRT/Farmlands card.

JayADee

2148 posts

Uber Geek

#973704 24-Jan-2014 17:36

Thanks, may ring them tomorrow. I just got a slight discount from my current provider today so should be interesting. I emailed a Registered valuer and got $575 as a price for valuation. A mate of mine paid $600 located in another town. I recalculated my contents insurance as well. Amazing how all the household items add up.

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Fred99

13684 posts

Uber Geek

#974660 26-Jan-2014 16:13

I suspect that companies still offering full replacement cover will eventually drop this, as the stated reason that other insurers have dropped full replacement cover was at the insistence of reinsurers. There are only a limited number of reinsurers with the resources to cover (another) natural disaster to the scale of the Chch quakes. AFAIK, these are all Europe based (Lloyds, Munich RE, Swiss RE etc), they talk together/collude. The RE contracts may run for a duration of several years, FMI's contracts may not yet be up for renewal. The US reinsurers don't have enough backing for major natural disaster at home (CA for example is woefully under-insured), and AFAIK do not pursue business in this part of the world.
One of the major problems with natural disaster and "open ended" full replacement cover is demand surge inflation. Fixing/replacing one house that burned down in a fire is one thing, fixing/replacing tens of thousands of houses is another matter entirely.
Nominated/Fixed sum is somewhat of a misnomer. There is no way that the contract commits the insurer to pay out that full sum in case of total loss in the way that a nominated sum may set the sum paid out for total loss on a car policy etc. It's a maximum from which the insurers will screw the policy holder down.
Regd valuers are of course very keen to promote FUD. Pragmatism is needed.

JayADee

2148 posts

Uber Geek

#974726 26-Jan-2014 18:07

The ANZ online calculator for insurance gave me the same ballpark figure I'd already decided to insure for, which was about 9 percent more than my insurer estimated. I'm probably going to go with that. I'll do a little ringing around in the morning and see who can offer what on a package deal.

Another friend I asked about it has a broker find him the cheapest deal ever year!

linw

2849 posts

Uber Geek

#974945 27-Jan-2014 09:41

Thanks, Fred, good info and good sense. Yep, the valuers have had all their Christmases come at once!

Talkiet

4793 posts

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#974957 27-Jan-2014 10:09

This is a great legal insurance scam. The only rational thing for an individual to do is to over-insure their house and pay the premiums on the over-insured amount.

Unfortunately, if you need to claim on it - the insurance will pay out only the mininum mount they then figure out to rebuild your house as it was.

So you are _ACTUALLY_ insured for less than you are paying for, but if you try and insure for the exact amount, there's a huge risk you could easily be 10's, MAYBE 100's of thousands out of pocket if you got your calculations wrong.

Whoever managed to sell the NZ public on this is surely lazing in the Mediterranean on their newest yacht as I type.

Cheers - N

Please note all comments are from my own brain and don't necessarily represent the position or opinions of my employer, previous employers, colleagues, friends or pets.

JayADee

2148 posts

Uber Geek

#974969 27-Jan-2014 10:32

It's all very annoying. I just emailed a broker. Maybe see if they can get me the same coverage cheaper on house, car, contents with a reputable company. I certainly do hope to never have to claim on it.

Last time I tried a broker (for our mortgage) I got a better deal negotiating it ourselves. :p

bazzer

3438 posts

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#977053 30-Jan-2014 08:45

Talkiet: This is a great legal insurance scam. The only rational thing for an individual to do is to over-insure their house and pay the premiums on the over-insured amount.

Unfortunately, if you need to claim on it - the insurance will pay out only the mininum mount they then figure out to rebuild your house as it was.

So you are _ACTUALLY_ insured for less than you are paying for, but if you try and insure for the exact amount, there's a huge risk you could easily be 10's, MAYBE 100's of thousands out of pocket if you got your calculations wrong.

Whoever managed to sell the NZ public on this is surely lazing in the Mediterranean on their newest yacht as I type.

Cheers - N

You can't have it both ways. Either you are insured for less than you are paying for or there's a huge risk of under-insuring, not both. E.g. you think your house will cost $1,000,000 to rebuild so you insure it for that. If there's a huge risk that it could be $100ks more than that then surely that means if you insure it for $1,200,000 there's only a small chance that it is over-insured?

MikeB4

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#977083 30-Jan-2014 09:22

Many years ago circa 1900 New Zealand was being screwed over by off shore Insurance companies, their premiums at the time were very high and the general business practices poor. The Government decided to form it own insurance company in response, The State Insurance Company.
The off shore companies tried very hard to stop this but the State company was successful. However we forgot all that and eventually sold the State to offshore owners. Now over 100 years later we are getting screwed again by off shore insurance companies.

Now that saying is "Those who cannot remember the past are condemned to repeat it."

Fred99

13684 posts

Uber Geek

#977119 30-Jan-2014 10:02

As I understand it, the purpose of the change to sum insured isn't to reduce the amount to be paid out in claims for natural disaster, but so that the insurance and reinsurance companies can present a figure disclosing their maximum liability/exposure. The reinsurance is purchased in fixed quantity contracts - not "open ended", so if the insurance company contracts with the homeowner is open-ended, then there's a risk that claims will exceed the ability of the insurer to pay (from reserves and reinsurance), which is exactly what did happen with AMI - as despite exceeding NZ Government regulated prudential standards and having an A++ rating from AM Best, AMI became technically insolvent - clearly unable to meet the total cost of claims. That this could happen was retrospectively obvious. Change was inevitable - as insurance is a fundamental need underpinning the entire financial system.
So I don't see the change to sum insured as a "scam", but an inevitable consequence of what happened over the past few years in NZ.
The biggest scam is the way EQC interprets the EQC Act, how Government has shifted goalposts for repair in the wake of the Chch quakes to be "less onerous to insurers", and the PR battle that's been waged in order to convince "the rest of NZ" that everything is going well under the circumstances.

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