Wellington Mayor Justin Lester has suggested the New Zealand Government may need to ensure affordable insurance is available in the earthquake-prone city following IAG’s decision to raise premiums in high-risk areas.

Mr Lester says he has raised concerns with Earthquake Commission (EQC) Minister Megan Woods and will invite the Insurance Council of New Zealand, IAG and body corporate and homeowner representatives to attend a forum.

“I want to canvass issues in the Wellington market and look at the immediate and long-term future for people needing insurance,” he said today.

“It may be that the Government needs to consider what insurance companies are required to offer in a market, and they may have to offer an affordable option where they operate.”

IAG has told New Zealand customers they may see price changes as EQC reforms take effect from July and the company ensures its premiums reflect risk levels and costs including reinsurance.

Customers living in areas more prone to natural disasters and severe weather events may have to pay higher premiums, while those in more benign areas may pay less.

“New Zealand’s environmental risks have evolved over the past few years and we need to take more account of those risks, so we can continue to be there for our customers across New Zealand when misfortune strikes,” EGM Customer and Consumer Kevin Hughes said yesterday.

EQC reforms will see it raise its building cover cap to $NZ150,000 ($140,400) from $NZ100,000 ($93,600), but the state-owned insurer will no longer provide up to $NZ20,000 ($18,720) for contents, leaving that to the private market,

IAG says it will pick up the cover for its customers who have contents policies.

Mr Lester says IAG has 40-50% of the Wellington market and premium increases could affect many people.

“Residents, businesses and property owners are now facing the prospect of higher premiums,” he said. "Some may not be able to afford it.”

“Insurance is crucial for a city. It has to be available and affordable for banks to lend, for businesses to operate efficiently, and for people to have peace of mind.”

The IAG premium changes would affect brands including AMI, NZI and State and well as products it provides for ASB, BNZ, The Co-operative Bank and Westpac.

Mr Hughes says IAG realises the changes will be a challenge for some customers and it will work with them through the process.

“There are a range of options available to customers to make this easier, including taking a higher excess or adjusting the frequency of payments to suit them,” he said.

“We will continue to provide solutions and work to make insurance as affordable as possible.”