‘My meagre possessions will just have to be incinerated’: retiree

Wellington retiree Jonathan Buck has decided that the possibility of his house burning down, taking all his possessions with it, is a chance he’ll have to take.

He said he had been told his premiums for his AA Insurance contents cover would increase nearly 40% this year, which was unaffordable on a pension.

“I thought ‘I just can’t afford it’. It went from $200 or maybe less to nearly $400 ... my meagre possessions will just have to be incinerated if there is a fire, with no cover to replace them.”

He would retain third-party insurance on his car “in case I hit a Rolls-Royce” but that had gone up 24%, too.

“I knew instantly I was paying for someone else’s mistakes or things like Gabrielle ... this is like users-pays like the Government tried to be. I’m so anti that.”

He said his area did not seem to be particularly dangerous for insurers. “We have no natural disasters, fire or otherwise.”

But he said he estimated it would cost only about $500 at The Warehouse to replace the furniture in his Moera, Lower Hutt, bedsit. The only thing he could not replace was a drop-front writing desk that belonged to his grandfather.

Justin Lim, from insurance data site Quashed, said Buck’s premium rise was in line with others in his area.

“Our most current data shows that for Wellington region average premiums quoted in Q1 v Q4 have gone up by 28%, from $818 to $1045. Some will have seen increases of 50% or more,” he said.

“In this case, perhaps increasing his excess would be an option to retain cover as doing away altogether with insurance is not ideal. Earlier in the year with the weather events, one benefit that showed to be important but often overlooked with contents insurance is temporary accommodation.

“Contents insurance goes beyond just protecting our assets and valuables but also securing a place to live – especially for renters.”

Stats NZ data shows a 19% year-on-year increase in the cost of contents insurance in the third quarter. IAG warned this year that car insurance premiums were increasing by about 20%.

AA Insurance head of claims Tom Bartlkett said it was aware of the impact the increased cost of living was having on New Zealanders.

“Supply chain constraints and inflation are having an impact on the entire insurance industry – locally and globally. Prices have risen across the board for building materials and labour, as well as consumer goods.

“Since Covid-19 hit, it is now significantly more expensive to replace or repair our customers’ assets. In addition to these inflationary pressures, we have also seen an increase in weather-event- related claims, which is increasing the insurance risk for some regions.

“Some areas are more prone to natural disasters, which means the location can also impact premiums. Locations that have a higher risk of earthquake or flood will generally have larger increases.”

He said insurers were changing their view of how risky New Zealand was.

“They are increasing the costs being charged to insurers, which means AA Insurance’s reinsurance costs have increased significantly. All of this flows through insurance premiums.

"As a responsible insurer, we are committed to ensuring we can be here for our customers when they need us to get back on their feet. This means we need to carefully price risk, and we regularly review the different factors that make up customer premiums to ensure they are an accurate reflection of the risk we take on.”

He said people who were having trouble with premiums should get in touch. They could adjust their level of cover or change the excess on a policy. “If the customer chooses a higher excess, their premium will decrease. They only need to pay the excess if they make a claim that is accepted.

“We offer monthly or fortnightly payments, which helps avoid large lump sum payments. Our teams are specially trained to support customers experiencing financial hardship and other vulnerabilities, so we encourage people to get in touch to see if we can help them with a solution if they’re experiencing tougher times.”

Some insurers are moving to risk-based pricing, which means people in riskier areas pay more for their insurance cover.

Rebecca Whiting is looking for a property in Hawke’s Bay and said she had been surprised to find some that Tower would not insure at all.

“Some properties that look totally fine and didn’t appear to be – they’re not in the council records for being high risk or anything like that, they just won’t insure. You put in the address and they just say ‘no, sorry, we can’t insure this property’.”

She said she could go to another insurer but if Tower was concerned, she was worried other insurers might back away, too.

“There were two or three, we were looking in Taradale, Tamatea. Parts of Taradale are known but I was surprised by these ones that didn’t appear to be near streams or affected by flooding in the past.”