Customers of Insurance Australia Group (IAG) New Zealand, who live in areas that are more prone to natural disasters and severe weather events could possibly pay more for their home and contents insurance from 1 July onwards. On the other hand, customers who live in areas that are less prone may pay less. Affected customers are from IAG's brands including AMI, NZI and State as well as from banks which IAG provides insurance for, such as ASB, BNZ, The Co-Operative Bank and Westpac.

The difference in premium rates is attributed to the changes in the cover provided by the Earthquake Commission (EQC) as well as natural disaster and severe weather-related risks. Recently, the New Zealand government made changes to the level of cover EQC provides for the damage caused by natural disasters to residential homes and contents.

While EQC will cover more of the costs for restoring damaged residential homes by paying up to NZ$150,000 ($100,010) plus GST per residential home, it will no longer provide cover for contents. Instead, IAG will provide this cover to its customers who have contents insurance.

Commenting on these developments, IAG executive general manager (customer and consumer) Kevin Hughes said that premiums need to reflect the level of risk and costs associated with providing insurance cover including reinsurance costs.

“Every customer and every property is different and so every policy will be affected differently, whether that be a price increase or decrease. 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. New Zealand’s environmental risks have evolved over the past few years and we need to take more account of those risks,” said Mr Hughes.

According to the Insurance Council of New Zealand, property in New Zealand is extremely well insured compared to other countries, which means the insurance industry bears most of the costs in the event of a natural disaster. Recent natural disasters in New Zealand include New Plymouth-Whakatane tornadoes and Northland-Bay of Plenty flooding which caused over NZ$2.9m and NZ$3.7m insured losses respectively.