Insurance affordability is one of the biggest problems confronting consumers in New Zealand, according to AA Insurance CEO Chris Curtin.

The Canterbury earthquakes led to home insurance premium rises of 69%, compared with wage inflation of 7%, he told the Insurance Council of New Zealand conference in Auckland last week.

“When an event causes insurance losses that amount to 20% of a country’s GDP… the impact on the affordability of insurance for that country’s consumers will be significant.”

He says reinsurance costs have soared and the Earthquake Commission (EQC) levy tripled, leaving the average AA home insurance policy costing $NZ950 ($840.28).

Of that, $NZ650 ($574.93) goes on reinsurance, EQC levies, fire services levies and GST.

Before the quakes, the average premium was $NZ560 ($495.33), with $NZ240 ($212.28) for reinsurers and levies.

Mr Curtin suggests a number of ways to tackle the issue.

Reinsurers must help keep insurance available and affordable, he says. “The change to sum-insured cover is a good start. We need to find more.”

Building codes must promote resilience and governments should prevent building on unsuitable land, while playing a greater role in mitigation.

“Given the issue of climate change, claims costs will go up if the authorities don’t do more to proactively protect communities.”

Mr Curtin says the fire services levy should be paid via rates and vehicle registration, rather than through insurance.

Consumers can help drive down prices by shopping around. “It is astonishing that, at a time when insurance premiums are at their highest ever, only about one in eight people switch at renewal.”

Digital technology can provide greater efficiency, he says.

“We need to allow our customers to interact with us in the way they choose; and digital will provide many people with more flexibility and keep costs in check.”