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995 posts

Ultimate Geek
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Topic # 242763 13-Nov-2018 12:28
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State Insurance is advising customers that if they live in an area at high risk of natural disasters, they could pay more for their home or rental property insurance than a similar property in a lower risk area.

Do you agree with this policy? State Insurance don't specify which areas of NZ are at high risk of natural disasters so which areas do you think meet this criteria? For example, is Auckland a high risk area compared with, say, Wellington?


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  Reply # 2124689 13-Nov-2018 12:32
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yes. is not insurance whole point to mitigate the risk of potential disaster? higher the risk, higher the premium.

 

 





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  Reply # 2124692 13-Nov-2018 12:35
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kobiak:

 

yes. is not insurance whole point to mitigate the risk of potential disaster? higher the risk, higher the premium.

 

 

 

 

Well, if that's the case, don't you think insurance companies should specify which areas of NZ are at high risk of natural disasters and which areas aren't?


 
 
 
 


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  Reply # 2124696 13-Nov-2018 12:42
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Wellington, Kaikoura & Christchurch are classed high risk due to Earthquakes.

 

The major insurance companies are still not taking on new home insurance in the mentioned areas if the property is currently insured by another insurer.

 

This is due to insurance companies current capacity they have with there own re insurers, its the insurance version of Telcos buying a certain amount of capacity from the wholesalers.

 

 

 

From my understanding, Tower started doing the premiums like this earlier this year (I could be wrong though)

 

The low hazard areas are subsiding the high risk areas but now they are going the route, if you voluntarily live in a high risk natural disaster area then you pay for it,




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  Reply # 2124707 13-Nov-2018 13:00
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JamesN:

 

Wellington, Kaikoura & Christchurch are classed high risk due to Earthquakes.

 

The major insurance companies are still not taking on new home insurance in the mentioned areas if the property is currently insured by another insurer.

 

This is due to insurance companies current capacity they have with there own re insurers, its the insurance version of Telcos buying a certain amount of capacity from the wholesalers.

 

 

 

From my understanding, Tower started doing the premiums like this earlier this year (I could be wrong though)

 

The low hazard areas are subsiding the high risk areas but now they are going the route, if you voluntarily live in a high risk natural disaster area then you pay for it,

 

 

Thanks James, well what about Hawkes Bay, New Plymouth, Nelson, the West Coast of the South Island etc etc, couldn't they also be regarded as high risk areas?

 

When you say "if you voluntarily live in a high risk natural disaster area", some people wouldn't have the option of shifting to a so-called "safe" area because of work and family ties etc. You might go to all the trouble to shift to a "safe" area and then suffer a major earthquake, flood or volcanic event!

 

Let's face it, the whole of NZ is vulnerable to earthquakes and other natural disasters, so it seems ridiculous to me to charge people in Wellington, Kaikoura and Christchurch possibly as much as 15% more for their home insurance than people who live elsewhere.

 

What about Taupo, isn't Lake Taupo due to erupt before too long, I wonder if Taupo is regarded as a high risk area?


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  Reply # 2124708 13-Nov-2018 13:02
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Stuff:

 

NZbrokers service manager Simon Moss said Tower appeared to be disengaging from some regions. It was possible to assess risk on a house by house basis with all the data available nowadays, he said. 

 

Insurance Council chief executive Tim Grafton said Tower was the only New Zealand company to go to a fully risk-based approach.

 

Two of IAG's brands, State and AMI had moved to partial risk-based cover but nowhere near the extent of Tower.

 

 

You might be better off switching between e.g. if your property is low risk within Wellington region then Tower might be cheaper than IAG OR if your property is super high risk in Wellington, IAG would be cheaper than Tower.

 

Unfortunately their data will be commercially sensitive, so you don't know until you get a quote/renewal and you certainly don't know how they have weighted various data inputs.

 

 

 

Bear in mind that the long-awaited EQC reform suggests lifting the EQC cap from $100,000 to $300,000. Although this will probably be delayed by the upcoming inquiry, there's broad agreement that the cap should be increased substantially (unless the inquiry suggests a fundamental change to EQC, such as becoming a natural disaster reinsurer to private insurers).

 

EQC is flat rate disaster insurance regardless of your location in NZ. This means that raising the cap should make cover cheaper for high-risk locations, because your private insurer won't be responsible for as much of the cost of reinstating your property (especially now that most insurers have capped their liability to your nominated replacement value)




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  Reply # 2124725 13-Nov-2018 13:27
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nickb800:

 

Stuff:

 

NZbrokers service manager Simon Moss said Tower appeared to be disengaging from some regions. It was possible to assess risk on a house by house basis with all the data available nowadays, he said. 

 

Insurance Council chief executive Tim Grafton said Tower was the only New Zealand company to go to a fully risk-based approach.

 

Two of IAG's brands, State and AMI had moved to partial risk-based cover but nowhere near the extent of Tower.

 

 

Thanks for the Stuff article reference. The article mentions that:

 

A $10,000 insurance premium hike from financially troubled Tower was a bit rich for Christchurch homeowner Roy Howell who had to find another more affordable insurer.

 

Tower confirmed the price rise from $2300 a year to $12,843 and said there was more to come for other Kiwis – the company will roll out fully risk-based assessments for flooding, erosion, storm and other identifiable risks.

 

Howell lives in a 1920s bungalow in the well-heeled suburb of Strowan-Merivale close to St Andrews College. He said his insurance broker was gobsmacked at the increase.

 

Surely, an increase in a home insurance premium from $2,300 a year to $12,843, wouldn't be accepted by any customers? And just because Christchurch has had some big earthquakes in recent years, does this mean that this area is likely to suffer more earthquakes in future than other areas of NZ?

 

 

 

 


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  Reply # 2124727 13-Nov-2018 13:33
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They do the same thing here in Oz... but mainly for bushfire prone areas.


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  Reply # 2124728 13-Nov-2018 13:39
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I support this. I don't feel that I need to be out of pocket for others lifestyles.

 

I do believe they also have categories for flooding. A friend has a farm in the most flood prone area of Northland, The Hikurangi swamp.. he pays way more than the people on the hills next to him but he gets paid out tens of thousands every odd year due to flooding.. 





 


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  Reply # 2124732 13-Nov-2018 13:45
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frednz:

 

kobiak:

 

yes. is not insurance whole point to mitigate the risk of potential disaster? higher the risk, higher the premium.

 

 

Well, if that's the case, don't you think insurance companies should specify which areas of NZ are at high risk of natural disasters and which areas aren't?

 

 

I'm sure they do somewhere in their policies. 

 

frednz:

 

Let's face it, the whole of NZ is vulnerable to earthquakes and other natural disasters, so it seems ridiculous to me to charge people in Wellington, Kaikoura and Christchurch possibly as much as 15% more for their home insurance than people who live elsewhere.

 

 

Yes, all NZ is high risk country, but some areas have higher risk than others. We all pay premium, but some pay more due to the risk.

 

Is it fair? yes. Is it easy to accept? probably not, as young student has less money to pay for high insurance, but mature person with higher income requires to pay less for insurance. Discrimination! :)





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  Reply # 2124736 13-Nov-2018 13:53
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I'm in auckland, personally I dont think earthquakes should be considered for high risks.. its pretty much everywhere in NZ where earthquakes can hit, sure some places dont suffer much/anything from them (e.g. auckland).  but Im happy to share the load of this kind of risk with others.   It might cost me $5 more a month, meh.

 

 

 

However, if you live on a hill/cliffside or surrounded by massive trees, then thats a different kind of high risk, thats specific to your house and you should pay more for that.  Since you bought the house knowing "hey im on a cliff".


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  Reply # 2124737 13-Nov-2018 13:53
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In that case, it's pretty clear that Tower doesn't want to be involved in that sort of risk anymore - they even suggested a broker for the customer to find a new insurer. Tower is a bit of an edge case, as they are a small standalone insurer compared to the IAG/Vero big boys. We know that Tower does property-by-property assessment - in this case it could be a combination of terrible land (TC3), flooding vulnerability, and a 1920's bungalow wouldn't be cheap to rebuild. So $12k won't be a typical Tower premium for Christchurch houses.

 

In general, an earthquake can cause an aftershock sequence lasting decades - so the risk of a 'big one' in Christchurch is more likely than it was prior to 2010. For comparing regions, the seismic z-factors are an indicator - Wellington is 0.4, Christchurch is 0.3. 0.3 and above is the high risk category.

 

 


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  Reply # 2124738 13-Nov-2018 13:54
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There are a few events that are due or over due. The whole of the South Island is high risk due to the Transalpine fault which is due to rupture, when that happens it is expected to be well above 8 on the richter scale and the entire South Island will be badly affected. The next is the Hikurangi subduction zone off the east coast of the North Island. That again is expected to be around 8 and large chunks of the North Island and parts of the South Island are at risk from the shaking and Tsunami. The Wellington fault which is linked to the Transalpine is over due and an event up to 8 is expected. If this fault is triggered by a rupture of the Tansalpine then a two thirds of New Zealand could be badly affected by that event.

 

Then there is the massive man made disaster, climate change and the whole country will be affected by increased severe weather events and coastal inundation, the impact of the inundation will be felt far inland due to changes in river flows and ground water levels. Lastly there the ever present risk of volcanic activity over a large chunk of Aotearoa.

 

 

 

Oh and one more thing, wild fires, they are a potential risk as the climate changes. Damm its depressing.





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The views stated in my posts are my personal views and not that of any other organisation.

 

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Ultimate Geek
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  Reply # 2124740 13-Nov-2018 14:06
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MikeB4:

 

There are a few events that are due or over due. The whole of the South Island is high risk due to the Transalpine fault which is due to rupture, when that happens it is expected to be well above 8 on the richter scale and the entire South Island will be badly affected. The next is the Hikurangi subduction zone off the east coast of the North Island. That again is expected to be around 8 and large chunks of the North Island and parts of the South Island are at risk from the shaking and Tsunami. The Wellington fault which is linked to the Transalpine is over due and an event up to 8 is expected. If this fault is triggered by a rupture of the Tansalpine then a two thirds of New Zealand could be badly affected by that event.

 

Then there is the massive man made disaster, climate change and the whole country will be affected by increased severe weather events and coastal inundation, the impact of the inundation will be felt far inland due to changes in river flows and ground water levels. Lastly there the ever present risk of volcanic activity over a large chunk of Aotearoa.

 

 

Thanks, I think that's a very good summary of NZ's likely future natural disaster risks, which indicates to me that it's pointless picking out a few areas of NZ and charging people in those so-called "high risk areas" more for their insurance than people in "possible" safer areas!  The whole of NZ is at risk from future natural disasters so I think the insurance companies are just trying to make more money out of people in some areas without fair and logical reasoning to back it up!

 

I wonder how insurance companies are dealing with all of NZ's coastal areas given the various predictions about climate change?


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  Reply # 2124743 13-Nov-2018 14:07
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nickb800:

 

You might be better off switching between e.g. if your property is low risk within Wellington region then Tower might be cheaper than IAG OR if your property is super high risk in Wellington, IAG would be cheaper than Tower.

 

Unfortunately their data will be commercially sensitive, so you don't know until you get a quote/renewal and you certainly don't know how they have weighted various data inputs.

 

Bear in mind that the long-awaited EQC reform suggests lifting the EQC cap from $100,000 to $300,000. Although this will probably be delayed by the upcoming inquiry, there's broad agreement that the cap should be increased substantially (unless the inquiry suggests a fundamental change to EQC, such as becoming a natural disaster reinsurer to private insurers).

 

EQC is flat rate disaster insurance regardless of your location in NZ. This means that raising the cap should make cover cheaper for high-risk locations, because your private insurer won't be responsible for as much of the cost of reinstating your property (especially now that most insurers have capped their liability to your nominated replacement value)

 

 

My concerns with this:

 

1. To lift EQC's reserves to cover a city-wide earthquake event (which let's face it, is the most likely to occur in NZ) - Wellington city, 100k dwellings - would mean a tremendous uplift in what folks are charged across the country. Necessary but will come as a shock - and just as the country paid for chc, so will the country pay for wlg

 

2. If $300k becomes the new normal, that insurance premiums don't adjust downwards accordingly to reflect the increased burden being carried by the taxpayer, effectively continuing the abdication of engagement from the insurance industry for what people need the most. 

 

It may have missed most people's notice, but it feels like insurance in general in this country is exiting because of the increased propensity to claim - the calamitous weather overseas, the destruction being caused by fire water wind and shaking, let alone individual human stupidity (strawberries anyone?). Insurance is one of those things you don't think of until you need to get it, and then all of sudden is horrendous getting it, let alone what is being charged.





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Ultimate Geek
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  Reply # 2124748 13-Nov-2018 14:13
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All insurance is risk based. People in a higher risk category pay a higher premium.

 

 

 

- Car Insurance. A car garaged in Ponsonby will have a different premium to one parked on the road in South Auckland

 

- Health Insurance. A person with a known history of a family genetic disorder will pay a higher premium than others

 

- Travel Insurance. Someone who plans to skydive or off piste ski will pay a higher premium

 

 

 

I don't understand why you're objecting to the same principles being applied to housing insurance?

 

 


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