Insurers likely to hike premiums for flood, slip affected areas

Tower Insurance is hiking premium prices for those living in flood or slip-risk areas.

The company says it comes amid a changing climate and risk environment - and follows a $5.1 million loss due to the events like Cyclone Gabrielle and the Auckland floods.

But it means consumers will be stuck in the middle, especially if other insurers follow their lead.

Speaking to Breakfast this morning, economic risk expert Belinda Storey said that as the continued effects of climate change are seen, premium increases across providers are inevitable.

“It’s inevitable that we’re going to have significant increases in insurance premiums in our most hazardous locations.

“For those who are experiencing significant premium increases, it might feel like price gouging, but I’m confident that even when inflation comes down, the insurance premiums in these locations are going to go up because they’re reflecting the risk.”

As for other insurers, Storey said it would depend on individual decisions by each company - but they will likely follow Tower over the next year.

“It’s unlikely that they’re going to want to be following immediately afterwards.

“I would expect to see a number of insurers delay at least this renewal cycle for the next 12 months.

“Simply because they’re not going to want the political attention that comes with those significant price rises immediately after an event.”

Consumer NZ’s Rebecca Styles said it would “only be a matter of time” before other insurers join Tower - which will make things tough for consumers.

“It’s really tough for consumers at the moment - with the cost of living crisis, this is just another cost.

“Most insurance companies price on the communities, so the risk is spread across the community, whereas Tower is doing it very much based on the individual level.

“So it will only be a matter of time before other insurers follow suit."

Storey said that Tower's openness regarding the hikes and their own financial situation is a good thing.

“They are willing to have much more direct conversations with the public about their risk pricing and how they’re going to cover insurance going forward,” she said.

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Styles said there were a number of things consumers could do to offset the price of premiums, like opting to increase excess - meaning people can pay $2500 per claim instead of $500.

“That can bring premiums down.”