Insurance Costs Surge 916% Since 2000, Threatening Access

The cost of insurance in New Zealand has risen dramatically, increasing by 916 percent since the year 2000, according to a recent report by Consumer NZ. This staggering rise positions insurance as the most significant price increase among items tracked in the consumer price index. The report highlights concerns that without industry reforms, a growing number of New Zealanders may soon find it challenging to secure affordable insurance coverage.

Consumer NZ’s investigation into the insurance sector emphasizes the impact of climate change on both the cost and availability of house and contents insurance. The report notes that the price of insurance has outpaced even that of cigarettes and tobacco, which saw a 608 percent increase over the same period. This surge in insurance costs is prompting many individuals, particularly retirees on fixed incomes, to reconsider their coverage options.

Rebecca Styles, the investigative team leader at Consumer NZ, reported that last year, 7 percent of individuals who dropped their house insurance did so due to rising costs. In 2023, this figure escalated to 17 percent. Styles shared anecdotal evidence of people opting to forgo insurance entirely, stating, “They’ve come to me and they’re like, ‘I can’t keep paying these, 15 percent, 20 percent, 30 percent increases year-on-year. We can’t afford it anymore.’”

With high-risk areas facing particular challenges in securing coverage, Styles indicated that options are increasingly limited for those struggling to pay. “We’ve got very low switching rates in New Zealand,” she explained. “If you live in Wellington and Christchurch, it’s harder to switch. You might not be able to get the quote online; you have to ring around, which you know is the life admin of reading the policies… it’s not a five-minute job.”

The report outlines that climate change, coupled with the rising costs associated with severe weather events, is at the forefront of escalating insurance prices. According to Stats NZ, significant increases in house insurance costs began to emerge in 2011, followed by notable spikes in 2017 and again from 2022 to 2023. The devastating 2011 Christchurch earthquake, which caused $21 billion in insured losses, and the 242 million paid out in 2017 for weather-related losses, serve as key milestones in the rising costs.

The catastrophic Auckland Anniversary weekend floods and Cyclone Gabrielle in early 2023 have exacerbated these trends, with losses estimated at $3.8 billion. Styles warned that without effective climate adaptation legislation, insurers may retreat from providing coverage altogether if risks become unmanageable. “Without serious intervention in the form of a government-led adaptation framework, with cross-party support, it’s possible that many New Zealanders will not be able to get insurance by 2035.”

She noted that recent announcements from insurers like Tower regarding more risk-based pricing could signal a further withdrawal from the market. “I think the numbers are just going to keep going up if we don’t get a climate education framework in place to help communities adapt,” Styles stated.

To address these challenges, Consumer NZ recommends a review by the Financial Markets Authority to ensure that New Zealanders are being charged fairly based on accurately assessed risks. Styles urged for enhanced transparency from insurers regarding policy renewals and pricing changes, as well as more accessible natural hazards data.

In addition, she called on the government to create a comparison and switching platform to simplify the process of changing insurers. This initiative, she argued, would provide policyholders with avenues to contest high premium hikes and ensure adequate coverage remains in place, particularly for those with mortgages.

Styles emphasized the need for collaboration among stakeholders, including local and central government, insurers, and property owners, to finance necessary changes. “Our research shows that people expect central and local government to pay, insurers to chip in, as well as individual property owners… but we need leadership and government,” she said.

In response, the Insurance Council acknowledged the challenging landscape for New Zealanders grappling with rising living costs. “As Consumer NZ highlighted, there are a number of drivers of premium levels, some outside insurers’ control,” the council stated, citing factors such as building cost inflation and global reinsurance. They asserted the importance of adopting a long-term view on natural hazard risks, particularly as climate-related events intensify.

The council supports government leadership on climate adaptation and the standardization of risk data to discourage construction in high-risk areas while investing in resilient infrastructure. “By acting now, we signal to global reinsurers that New Zealand is addressing rising climate risks and working to keep insurance accessible for future generations,” the Insurance Council concluded.

The implications of these developments are significant, not just for individual homeowners but for the broader community as the struggle for affordable insurance continues.