New Zealand’s move to sum-insured from total-replacement cover last year has raised fears many homeowners could be underinsured.

IAG says three-quarters of the way through renewals, only 15-35% of customers across its various brands have changed their sum insured from the default position they were offered.

Spokesman Craig Dowling told insuranceNEWS.com.au that IAG – which owns the NZI, AMI and State Insurance brands – feels the transition is going fairly well. But it will do more research on why some consumers are not calculating the values of their homes.

It has made clear in renewal notices that the default is only a suggestion based on the best information to hand, which in many cases is limited to the location and size of homes.

“The Canterbury earthquakes highlighted that the information we held was different in some instances from the reality of the homeowner’s property,” he said. “Being a great DIY nation, a lot of work had been done on many homes.”

Mr Dowling says policies written via brokers are more likely to have recalculated valuations.

He says the suggested sum insured may be right for many people, but others may have chosen it to keep down premiums.

“We are concerned that if the worst happens, and the home becomes a total loss, that the customer is then unhappy with the sum chosen and points the finger back to the insurer.”

The Insurance Council of New Zealand says insurers have invested heavily in informing customers about the changes and report the transition is going smoothly.

“Based on informal reports from the industry, about 60-70% of customers seem to be satisfied with the default amount presented to them, so estimates by some groups that more than 90% of New Zealanders have accepted the default sum are exaggerated,” a spokesman told insuranceNEWS.com.au.

“We know of customers who are deliberately nominating a figure below the default amount because they plan to downsize if some misfortune strikes.”

Insurers have provided online calculators and help for customers, and staff have visited community groups to explain the change.

IAG surveyed customers in February last year. It found only 33% of homeowners were aware of the transition, and then spent $15 million on an advertising campaign.

Another survey in July showed awareness had risen to 80%.