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Higher Wellington premiums reflect risk: IAG

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Property owners in Wellington will be paying more to insure their houses because the national capital is a high-risk area for earthquakes, IAG New Zealand says.

The insurer recently announced plans to take a more conservative approach to home and contents cover in the city, sparking concerns the move could make insurance unaffordable and confusion over whether the insurer intends to pull out of the market.

“There’s been a little confusion about what we were doing in this market,” IAG NZ GM Corporate Relations Bryce Davies told a press conference that followed a forum in the city called to discuss premium affordability issues.

“We are here and writing business – in fact, we are growing in Wellington,” he said. “And yes, we are applying risk-based pricing and it’s having an effect for homeowners in high seismic areas…

“They see premiums going up to reflect that risk, but in all other parts of the country where there is lower seismic risk, we are actually giving customers decreases.”

He says IAG New Zealand is contacting customers affected by the new approach to explain the process that goes behind every pricing decision.

“We actively encourage people to shop around,” Mr Davies said. “We want people to be well insured. We want to give people as good a price as possible.”

Insurance Council of New Zealand CEO Tim Grafton, who also spoke at the press conference, says the premiums being charged in New Zealand are catching up with other earthquake-prone markets like Japan and California.

He says the time may have come for New Zealanders to confront the challenges and agree on long-term sustainable solutions.

“What’s happening now is that we’re seeing [rising premiums] for some properties, particularly those on soft soils and reclaimed lands, and other factors that show they are at greater risk of a loss after an event.

“These properties are starting to see prices that are aligned with these other countries. That is not something that we should be backing away from. We’re just as seismically challenged, [so] how do we build more resilience?”