Insurance Premium rises due to "risk" profiling

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#2062327 25-Jul-2018 14:36

I always think back to when we had the video shop in Hornby.

Prior to 2010, we were paying around $100-150 per month for business interruption insurance. Upon renewal in June 2011 (so after both quakes), the premium went to about $300 - $350, it was at least double (I can't remember the exact figures anymore). Weve just had 2 big quakes, and even though I was fortunate enough not to have to claim for quake damage, fair enough I thought. Besides, for a long time as soon as you said you were from Christchurch area, no other insurer would even quote for any insurance anyway, so you either liked it or lumped it. June 2012 rolled around and yet again, premium more than doubled, now just on $700/mth, yet in the preceeding 12 months, there had been no further quakes nor claimable events. At this point I did try getting other cover but still no dice, "Christchurch" no way.

Now that Canterbury has had 2 big events, does that mean we are more likely or less likely to have a future event?

My primary school science level of understanding is that essentially the energy that had been built up between the two plates has been alleviated and re-settled to a new status quo. That could be miles off the mark or completely inaccurate, but given actual scientists have no way of predicting when or where quakes will hit (other than a "theres a 40% chance of an event greater than a 4.0" bollocks prediction) then my view is that insurance companies rank right up there (or is that down there) with Ponzi Scheme sellers, "Big Pharma", "Big Oil" and the worst of the worst, local body councils. They are all bottom feeding money hungry grubs out to squeeze every cent out of the poor public.

mattwnz

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#2062340 25-Jul-2018 15:06

Geektastic:

01EG:

You worry about Insurance rise and in our case AMI will not insure the house at all because of high risk, our house is on the hill, Aro Valley, Wellington :)

I'm not sure they understand how insurance works.

If you want to insure something for $100, they are free to quote a premium of $99 so that their risk is only $1...it's supposed to be up to you whether to accept that offer. They could go out into the market and re-insure their risks to further mitigate them. Or find a syndicate of Lloyds Names who will underwrite.

If every insurer does that to you - or any subsequent owner - you would be unable to get a mortgage.

IMO that means they don't want your business if they charge like that. Potentially banks could be at risk here too, as well as the NZ economy as a whole, because if a large number of houses in EQ or flood risk areas find it hard or unaffordable to get insurance, banks may not be be willing to lend.Many people wouldn't want to buy a house that can't get insurance at an affordable level. So those houses may be worth a lot less than the mortgage on it. Hopefully the government is going to do something before it gets much worse.

mattwnz

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#2062341 25-Jul-2018 15:09

sen8or:

Now that Canterbury has had 2 big events, does that mean we are more likely or less likely to have a future event?

I think the less we know the better, because they don't seem to be any better at predicting earthquakes than they have ever been. So I do wonder if all the research into the geology side of things is worth it. Wouldn't it be better spent on designing buildings to better withstand earthquakes, with higher bracing requirements etc.

tdgeek

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#2062348 25-Jul-2018 15:32

Geektastic:

I'm no geologist but I have always understood that earthquakes cannot actually be predicted with much accuracy, unlike volcanoes.

They can predict eruptions? When will White Island have the next significant eruption? Auckland? Lyttelton? Moreover Yellowstone magma superchamber? Which will erupt next year?

I know what you mean, but its not relevant.

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#2062352 25-Jul-2018 15:37

sen8or:

Now that Canterbury has had 2 big events, does that mean we are more likely or less likely to have a future event?

Less. I heard 10,000 years as one estimate for the Greendale Fault. But there is Feb 22 fault, unknown faults.

Re risk, NZ is an EQ county, doesn't matter where you are. BUT, IMHO, these increases are a convenient and justifiable (ChCh was big, others since, who knows, $$$) You can't pin a number and ask anyone to justify it, too many missing numbers from the equation. So, as they cant get caught for misleading, they cant be caught.

antoniosk

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#2062399 25-Jul-2018 16:20

01EG:

You worry about Insurance rise and in our case AMI will not insure the house at all because of high risk, our house is on the hill, Aro Valley, Wellington :)

AA Insurance seems to be writing in welly still - tried them?

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01EG

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#2062400 25-Jul-2018 16:22

antoniosk: AA Insurance seems to be writing in welly still - tried them?

Yes of course, we did not give up :)))

mattwnz

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#2062429 25-Jul-2018 16:47

tdgeek:

sen8or:

Now that Canterbury has had 2 big events, does that mean we are more likely or less likely to have a future event?

Less. I heard 10,000 years as one estimate for the Greendale Fault. But there is Feb 22 fault, unknown faults.

Re risk, NZ is an EQ county, doesn't matter where you are. BUT, IMHO, these increases are a convenient and justifiable (ChCh was big, others since, who knows, $$$) You can't pin a number and ask anyone to justify it, too many missing numbers from the equation. So, as they cant get caught for misleading, they cant be caught.

But I think the big difference now, is the high price of housing and the cost to build, compared to previous earthquakes. So that asset is now worth far more compared to earnings. It is one of the many problems with the government allowing house prices to get so out of proportion with earnings. So just based on that fact alone, I would expect premiums to rise across the board. But I would hope that people who are in safer areas aren't getting cheaper deals, and being subsidized by those people in more risky areas. This is why I don't think there is enough competition in the market, and we really need to go back to a state operated insurance company. We do have a kiwi bank, which made a very big difference to the market when it came in.

Groucho

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#2062434 25-Jul-2018 16:48

SJB:

I'm about to ask Tower if they do a policy without earthquake cover and if so what the premium is. Has anybody else tried this?

Be careful of the unintended consequences. If there was an earthquake you came through fine but you had claimable damage from a resulting tsunami. It wouldn't surprise me if the insurers try to argue it was caused by the same earthquake event leaving you without cover. I don't know the ins and outs or even if that's a thing but post Christchurch any excuse seems to go...

nickb800

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#2062453 25-Jul-2018 17:03

tdgeek:
sen8or:

Now that Canterbury has had 2 big events, does that mean we are more likely or less likely to have a future event?

Less. I heard 10,000 years as one estimate for the Greendale Fault. But there is Feb 22 fault, unknown faults.

On geological time frames you might expect a reduced risk following a big one, due to relief of pressure.
But on human time frames, aftershocks can continue for 50+ years after a big event - meaning we are vulnerable to significant after shocks for the rest of our lives. Think of what we experienced in the hours and days after each big one - the after shocks got smaller and more spread apart, but there were still 'surprises' like boxing day 2010, Valentine's day 2016 and June 2011 aftershocks. Fortunately, we're more resilient so quakes like Valentine's day 2016 caused little damage or disruption despite similar force to some of the earlier big quakes

Aredwood

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#2062485 25-Jul-2018 17:47

mattwnz:
There does now seem to be a lack of competition in this market due to consolidation. IMO this is approaching the stage of people needing to self insure, or the government is going to have to step in, so everyone can get insurance at an affordable level. The whole point of insurance is that the cost is spread across a large population relatively evenly, and kiwis are essentially looking after one another. It is the kiwi thing to do, but I do think this attitude has changed over the last decade.

The whole point I believe we have EQC, is so people who live in higher risk areas are also well protected at an affordable level. In't this sort of thing the reason the state setup an insurance company, because people were having problems getting insurance, or that insurance was going to be cost prohibitive based on their location. The fact is that nothing has changed in terms of earthquakes, they have always occurred, and will continue to occur.

All the government needs to do is raise the max EQC payout to a more sensible level. $100K was ok back when the EQC was created. But house prices have increased since then. (understatement)

It realistically needs to be $1 Million. And then adjusted for inflation.

Then there is the moral hazard of governments paying to help those without insurance. The government should just offer an "EQC lite" cover. That covers every property by default. And which has the fees included in the council rates.

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Fred99

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#2062502 25-Jul-2018 18:16

Aredwood:

All the government needs to do is raise the max EQC payout to a more sensible level. $100K was ok back when the EQC was created. But house prices have increased since then. (understatement)

It realistically needs to be $1 Million. And then adjusted for inflation.

Then there is the moral hazard of governments paying to help those without insurance. The government should just offer an "EQC lite" cover. That covers every property by default. And which has the fees included in the council rates.

EQC cap has been increased to $150,000 (&GST) commencing 1 July 2019.

EQC cover for contents is going to disappear (there was a $20,000 cap payment).

Yes - probably should have been higher, but EQC reserves are gone, the levy has increased (and another reason for higher insurance costs), but last time I worked it out, it was about 40 years "earthquake free" to restore the reserves to the level that they were at before the Chch quakes. They'd have to buy even more reinsurance (if it was available - and that's not a "given") - the cost of that only extends the time it would take to build up a decent size disaster fund.

No contents cover is a good move. It was bloody stupid for EQC to be paying out claims for people's collections of tea sets etc, it cost a fortune, and was an administrative nightmare.

Aredwood

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#2062503 25-Jul-2018 18:30

Agree with the removal of contents cover.

But the EQC payout cap still needs to be raised far higher than $150K. As the risk that is not covered by the EQC, is instead covered by your insurance company. This means that you are still paying to have that risk covered.

Higher EQC premiums would be offset by lower premiums for the rest of your insurance cover. As the only thing that would change is who provides the necessary cover.

Fred99

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#2062508 25-Jul-2018 18:42

Aredwood: Agree with the removal of contents cover.

But the EQC payout cap still needs to be raised far higher than $150K. As the risk that is not covered by the EQC, is instead covered by your insurance company. This means that you are still paying to have that risk covered.

Higher EQC premiums would be offset by lower premiums for the rest of your insurance cover. As the only thing that would change is who provides the necessary cover.

Ultimately - it's the same cartel of global reinsurers who carry the risk for cover provided by EQC or private insurers.

That's why EQC exists - a notion that it's better for a nation "self insure", and also to provide a fund for emergency assistance to help people get on their feet / back in their homes.

After the Chch quakes, at first it seemed like they were on to it. A couple of months down the track - it became apparent that they were way, way out of their depth.

TBH - from my personal experience ($250,000 damage to home), I'd have probably been happier to have no insurance - I'd have just fixed my place at my cost (and only about 1/2 that "QS'd" cost). Dealing with abect fools and idiots wasted 2 years of my life - and I value my time higher than that. Not just EQC, our insurer was staffed by morons too.

Dratsab

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#2062517 25-Jul-2018 19:02

Our insurance (Vero) went by about 25% a few months for our place which is in a very stable area. I pointed out in a thread a short while after the Kaikoura earthquakes that a friend of mine, who is 'well placed' in the insurance industry told me to expect massive hikes of up to 100% as part of the fallout. I haven't spoken to them about this issue for quite some time, but at a guess I'd say hang on to your hats - there'll be more coming.

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