Insurers should take more action to ensure homeowners do not unwittingly underinsure, according to a New Zealand consumer group.

Most New Zealand homes were insured for total replacement before the Christchurch earthquakes but the country has moved to sum-insured in the past two years, and Consumer NZ warns homeowners are struggling to properly value their properties.

Insurers offer a default sum, and there are reports that most customers opt for this.

However, Consumer NZ CEO Sue Chetwin told insuranceNEWS.com.au the defaults ignore property features that increase values, while insurers’ online calculators are also inaccurate.

Earlier this year Consumer NZ arranged valuations on two houses, in Auckland and Wellington.

The insurer’s default sum for the Auckland property was $NZ460,000 ($411,500), while the valuers gave estimates of $NZ576,170 to $NZ985,000 ($515,420 to $881,140).

The default sum for the Wellington house was $NZ465,000 ($415,970), compared with valuers’ estimates of $NZ718,079 to $NZ1.19 million ($642,370 to $1.06 million).

Ms Chetwin says online calculators should be improved and “there needs to be some regulation around the businesses that actually provide this information”.

“It is such a big issue for consumers in New Zealand because of the radical change in the way house insurance is done here,” she said.

Insurance Council of New Zealand Operations Manager Terry Jordan says insurers are doing all they can to make it clear default valuations use basic information such as postcodes and house size, and they are encouraging people to make their own decisions.

“It is a homeowner’s responsibility to give the insurer the value of the sum insured, because nobody knows more about the home than the property owner,” he told insuranceNEWS.com.au.

Mr Jordan says online calculators may give a better estimate than default valuations, because they take account of extra features.

Owners can also get a valuer or quantity surveyor to value their homes.

But he says almost all losses are for less than the full sum insured, with the average claim being about $NZ3100 ($2773).

“The only time [the full sum] will be needed is in a catastrophe situation like Christchurch,” he said. “Even where there is a fire and the house burns down, you still have pathways, fences, gates and retaining walls. Even then it is not a full loss.”