Two in five insured New Zealand homeowners cannot say what their own excess is – and nearly half have deliberately raised it. Together, those findings from new Vero Insurance research point to a market in which cost pressure is reshaping policyholder behaviour faster than the advice channel is tracking it, at a moment when regulators are scrutinising both insurance affordability and access to financial advice.
Vero’s survey of 1,172 insured homeowners, conducted by Talbot Mills Research, found 46% had deliberately chosen a higher excess than their insurer’s standard offering, and 57% were carrying an excess above $500 – despite standard excesses typically sitting between $300 and $500. Among those who had actively raised their excess, 66% cited premium reduction as the primary driver. Vero’s own book reflects the same shift. Uptake of $1,000 excesses has risen since mid-2022, while selection of the $400 option has declined over the same period. The insurer estimates that opting for a $5,000 excess could reduce an average annual premium by around $300, depending on underlying risk factors.
Nichola Young, executive manager of pricing and underwriting at Vero, said the data matched what the company had been observing as cost-of-living pressure built. “It shows that our customers are making trade-offs to balance the cost of premiums with the level of risk they’re willing to carry. The choice ultimately sits with the customer, but the important thing is understanding what that means if you ever need to make a claim,” Young said.
The Vero findings sit within a documented period of sustained premium growth. Treasury found that home insurance premiums grew at three times the rate of general CPI since 2011, with a 40% rise in the two years to early 2026. The average cost of house insurance nationally stood at $2,949 per year as of Q2 2026, according to the Quashed Index – the first easing after increases of 24% in Q2 2024 and 12% in Q2 2025.
The cumulative impact has pushed some households well beyond excess adjustments. An August 2025 Consumer NZ report, drawing on Stats NZ data, found the share of households cancelling or not renewing house insurance because of cost rose from 7% in 2022 to 17% in 2025, with insurance ranking among New Zealanders’ top four financial concerns alongside housing, food, and household debt. Voluntary excess increases, in that context, represent a middle path – retaining cover while reducing its cost – rather than the more damaging outcome of policy lapse. The stakes of that choice are not abstract. At an Insurance Council of New Zealand (ICNZ) panel in June 2026, FMG chief executive and ICNZ chair Adam Heath was asked who carries the risk when insurance becomes unaffordable for a growing share of New Zealanders. His answer was direct: “We all do.”
Young cautioned that raising an excess does not address every factor pushing premiums higher, particularly for properties in elevated natural hazard areas. “It’s important to understand that increasing your excess won’t necessarily offset every driver of rising insurance costs. Premium increases in recent years have been influenced by factors such as the growing cost of natural hazards and increased taxes and levies. If your premium is higher because your home faces greater flood or weather risk, increasing your excess is unlikely to significantly reduce your premium,” she said.
ICNZ has stated that taxes and levies already account for around 40% of a typical home premium – a component entirely unaffected by excess selection. The Reserve Bank of New Zealand’s (RBNZ) May 2026 Financial Stability Report identified affordability, underinsurance, and insurer retreat from flood-exposed areas as pressures that could increase financial stability risks and noted that the Council of Financial Regulators’ (CoFR) Insurance Affordability Review is examining the issue across competition, consumer experience, regulatory costs, and risk information.
That review, directed by Cabinet in January 2026 and due to report to ministers by mid-2026, had not released findings publicly at the time of publication. A Treasury-recommended increase to the Natural Hazards Insurance levy – from 16 cents to 24 cents per $100 of building cover, which would raise the maximum annual levy per dwelling from $554 to $828 – has been deferred until the review reports, meaning levy settings and affordability findings will be considered together.
The finding with the most direct implications for brokers and distributors is not the excess trend itself – it is that 42% of insured homeowners said they did not know what their current excess was. A substantial portion of policyholders are carrying a financial obligation they cannot quantify, pointing to a structural gap in ongoing policy engagement across the distribution chain. That gap sits within a broader, documented advice deficit. A March 2026 Financial Markets Authority (FMA) review found only 28% of New Zealanders accessed financial advice in the past 12 months, with the regulator identifying significant opportunity to expand access so more New Zealanders can benefit from it. Insurance-specific decisions – including excess trade-offs that materially alter a household’s financial exposure – fall squarely within that deficit.
Vero’s data found a further 63% of respondents would consider raising their excess if premiums rose significantly, indicating latent demand for structured advice conversations that is not currently being met at scale. Both figures have direct implications for how brokers approach annual reviews and needs analysis obligations under the Financial Services Legislation Amendment Act. Young said broker engagement remains the recommended pathway for customers weighing excess changes. “Rather than considering premium savings in isolation, we encourage people to have a conversation with a broker or adviser. They can help you understand the different options available and ensure that you are weighing up the benefits of any savings with the risk of paying a higher excess if you need to make a claim,” Young said.
The RBNZ estimates the total sum insured for New Zealand residential dwellings in 2024/25 at around $1.5 trillion, while the Natural Hazards Commission (NHC) estimates approximately 60,000 homes are currently uninsured. Against that backdrop, Vero positioned voluntary excess increases as a materially better outcome than policy cancellation. Of those who had raised their excess, 9% described it as a temporary measure with plans to return to a standard excess, and 57% said the adjustment had delivered noticeable premium savings. “A higher excess can be a way to manage the cost of premiums, particularly temporarily, while making sure you still have cover in place if you’re hit by a really big, financially devastating disaster – such as a house fire or a major flood,” Young said.
