IAG NZ expects future premium increases in the New Zealand market to be lower than in the past few years, after it raised home insurance rates by an average of 30% following the Canterbury earthquakes.

The insurer put up prices to recover its reinsurance costs, which grew from 8% of gross written premium (GWP) in 2009/10 to 15% in the first half of 2012/13.

Rate rises have been “significant and necessary”, IAG New Zealand CEO Jacki Johnson told an investor briefing last week.

Reinsurance pricing has been “painful”, but having no available reinsurance capacity would have been worse, Group GM Reinsurance Julie Batch says.

Australia and New Zealand still provide an opportunity for global reinsurers to diversify their risks, Guy Carpenter Vice Chairman David Priebe told the briefing.

The four biggest risks for reinsurers remain windstorms on the US east coast, Californian earthquakes, and catastrophes in Europe and Japan, he says.

“Reinsurers can step up and provide substantial limits to quality companies such as IAG.”

Ms Johnson says the Canterbury recovery is proving more protracted than first thought, but it aims to finalise all claims by 2015.

The New Zealand market has high insurance penetration of 77%, which amounts to $NZ5 billion ($4.1 billion) GWP. It has grown about 35% since 2009 on post-earthquake rate increases.

IAG’s New Zealand business now represents almost 17% of the group’s GWP.

Its underlying margin was 11.5% in the first half of this financial year, which the company says is strong during a challenging period.

About 44% of GWP came from intermediated channels in the first half, with the same amount from direct business.

Integration of the AMI business, which was acquired in 2011, is progressing. The acquisition raised IAG NZ’s market share to nearly 40%.

IAG NZ has operated a two-brand model, using State Insurance for direct sales and NZI for its intermediated business. Since acquiring AMI it has been selling direct insurance through both State and AMI.

EGM Direct Insurance Craig Olsen says the two brands attract different demographics and have different distribution methods.

State focuses on call centres and online sales, while AMI is more branch-driven, he told the briefing.

Meanwhile, IAG NZ is trying to educate consumers about its shift from full-replacement home policies to ones based on a specific sum insured.

Ms Johnson says the change was prompted by reinsurers calling for clearer information about exposures following the earthquakes.

The company recently launched a campaign featuring an online calculator that estimates the likely cost of rebuilding a home based on age, structure, location and other features.

It has also trained its customer service centre to deal with the changes.

“The events of the past two years have helped insurance be recognised as very relevant,” Ms Johnson said.

“There’s nothing like natural events to reinforce the importance of home insurance. I have never [before] been in a market where cab drivers know the role of the reinsurer.”

The recent landmark ruling on Christchurch’s red zone ­– in which the New Zealand High Court found red zone designation does not in itself trigger an insurance claim – was “a win for the industry”, Ms Johnson said.

It means that if an insurer deems a claim to be a repair job, that is what the insurer will pay for.