The Treasury has acknowledged its limited understanding of how the insurance market operates for apartment owners, according to an NZ Herald report. To address this, the government has initiated a nationwide survey aimed at comprehensively understanding the dynamics of this sector.
The impetus for this survey stems from the challenges some apartment owners face in coping with insurance premiums rising over the past decade. Tim Hampton, the Treasury economic system director, highlighted the methodological gap in monitoring residential insurance prices, especially concerning apartment buildings, as online quotes are not available for them. To rectify this gap, the Treasury has dispatched the survey through the Body Corporate Chairs Group and Inner City Wellington residents’ association, targeting body corporate chairs for insights.
According to NZ Herald, Hampton noted the survey’s focus on examining price fluctuations and insurance availability over time aligns with the Treasury’s mandated responsibility for advising on insurance market functionality. Any concerns surfaced by the survey will be duly communicated to ministers for consideration.
Finance Minister Nicola Willis anticipates being briefed on the survey findings by early March. “The Treasury has been carrying out price and availability monitoring of residential insurance prices since the EQC cap was increased in October 2022 and this has recently expanded to include apartment buildings,” said Willis.
The escalating cost of insuring Wellington apartments has become burdensome for many owners, particularly those residing in earthquake-prone buildings facing steep year-on-year premium hikes. Geraldine Murphy, a spokesperson for the Inner City Wellington residents’ association, highlighted the impact of insurance costs on affordability, pressuring individuals with fixed incomes or substantial mortgages.
Murphy, residing in a Wellington apartment valued at $860,000, expressed concern over insurance premiums consuming a significant portion of her body corporate fees. She highlighted disparities in premiums between apartments and standalone houses, noting the financial strain faced by apartment owners.
Tim Grafton, CEO of the Insurance Council, attributed the higher insurance costs for apartments to their larger size, complexity, and shared ownership structure, which inherently increases risk. He cited other factors that could contribute to the surge of premiums, including construction inflation and rising re-insurance costs.
“Insurance premiums have increased due to the 2016 Kaikoūra earthquake, construction inflation, increased costs of re-insurance and the increased costs of claims from recent events,” said Grafton.
Murphy advocates for more insurance options to address concerns on affordability, including amendments to the Unit Titles Act for greater clarity. She stressed the need for pragmatic solutions given the impracticality of rebuilding for many apartment owners post-disaster.
While the Ministry of Housing and Urban Development acknowledges these concerns, it has indicated it is not currently looking into the issue. “Insurance cover for multi-unit dwellings is a complex issue. Any changes to this area of the law would require public engagement,” it said in a statement.
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