Home insurance in New Zealand may move to fixed-cover policies instead of full-replacement policies, as reinsurers seek more certainty about their exposure.

Fixed-cover policies, in which a house is insured for an agreed value, are standard in Australia and used to be common in New Zealand until about 20 years ago, when competition between insurers saw full-replacement policies become more common.

Insurance Council of New Zealand CEO Chris Ryan says he does not know of any insurers that have already made the switch, but “I think some will”.  

“Reinsurers are requiring people to declare exactly what they’re being insured for,” he told insuranceNEWS.com.au.

“They would like to have the definitive amount they have maximum exposure for.”

IAG spokesman Craig Dowling says the company is “aware of the necessity to move in that direction at some point”.

“At this stage, we see it as very early days.

“There will be some education to be done in the New Zealand market if or when there is a change to be made.

“We’re learning lessons from the Christchurch earthquakes. Reinsurers are seeking more certainty over their exposure when these events happen.”

He says it is “hard to tell” what the impact on premiums will be.

“Concerns about the affordability of insurance are at the forefront of our minds,” he said. “We don’t want a situation of non-insurance or underinsurance.

“We see it as an opportunity to have a conversation with customers about the role of insurance and the value of the asset they’re insuring. For the last while they haven’t had to think so much about that.”

Mr Dowling says it will be a good opportunity to discuss renovations or upgrades undertaken between renewals, as some records after the earthquakes were out of date.