The Insurance Council has rejected claims that New Zealand has reached a tipping point on insurance availability, despite AA Insurance halting new policies in several South Island towns due to natural disaster risks.
Insurance Council chief executive Kris Faafoi told Morning Report the restrictions affected only one insurer and did not represent an industry-wide problem. AA Insurance temporarily stopped offering new home, business, and landlord insurance policies in Westport, Woodend, Rolleston, Lincoln, and Blenheim.
“It’s only one insurer – it’s not an industry-wide issue,” Faafoi said. “They’re obviously making a business decision based on the exposure they’ve seen with customers in one particular area.”
AA Insurance cited flood risk in Westport and maximum seismic risk exposure in the Canterbury townships and Blenheim as reasons for the restrictions, according to RNZ.
Faafoi said other insurers had already begun accepting business in the affected areas and encouraged customers to shop around. He acknowledged insurers had warned about increasing risks from natural hazards and climate change.
“The risk of events becoming more severe and more frequent is real and as a country we need to deal with that, not just to protect communities from the kinds of damage that has been caused over the last couple of weeks but also to keep insurance accessible and affordable over the long term,” Faafoi said.
The government has launched a six-month, high-powered review into rising home insurance costs after Treasury analysis found premiums had increased about 40% over the past two years, growing at roughly three times the rate of inflation, 1News reported. Finance Minister Nicola Willis said the review would examine all factors affecting costs, including risk exposure and company pricing decisions.
“My officials have advised me this is something we don’t quite clearly understand all the drivers of what’s going on, how much of it is due to the increased amount of risks we’re facing, how much is to do with the companies – their own pricing decisions,” Willis said.
Data from insurance comparison platforms shows uneven shifts in home and contents insurance pricing across regions, with areas such as Canterbury and Wellington seeing steeper increases, while some other parts of the country have more modest movements.
The council of financial regulators will conduct what Willis called “a deep dive” on improving cost and access.
Faafoi welcomed the review and noted 40% of premium costs came from taxes and levies. He said the council had not yet received specific requirements but was prepared to cooperate.
Responding to Treasury findings that insurance companies were more profitable in New Zealand than Australia, Faafoi said New Zealand ranked second-highest globally for risk profile according to Lloyd’s Premiums. Insurers faced a $4bn exposure from events including Cyclone Gabrielle and the Auckland anniversary weekend floods in 2023, requiring strong balance sheets.
