Insurance has experienced the highest price increase of any item tracked in the consumer price index since 2000, Consumer NZ has found.
Consumer NZ has published a report on the insurance industry, examining the impact of climate change on the price and accessibility of house and contents insurance.
It said the cost of insurance has risen by 916% since 2000, surpassing the 608% increase in the price of cigarettes and tobacco.
The organisation warns that unless the industry makes changes, an increasing number of people might be unable to obtain insurance in the future.
The rising prices are causing people to cancel their insurance, Consumer NZ investigative team leader Rebecca Styles said. She explained that this is especially problematic for retirees on fixed incomes.
“They’ve come to me, and they’re like, ‘I can’t keep paying these, 15%, 20%, and 30% increases year-on-year. We can’t afford it any more.”
According to Styles, 7% of people dropped their house insurance in 2022, and they did so due to the cost. This year the figure has risen to 17%.
“The anecdotal feedback we’ve received is people are making what seem like extreme pragmatic decisions – ‘Oh, my mortgage is paid off; well, I’ll drop my insurance as soon as that’s done.’ I asked them, ‘What will you do if there’s a natural hazard or something, you’re not covering for that.’… They’re like, ‘Oh, well, I’ll live in a caravan.’ Taking big risks with their financial future, really.”
She mentioned that there were few options available for people having difficulty with payments.
“You can switch around; we’ve got very low switching rates in New Zealand… but if you live in Wellington and Christchurch, it’s harder to switch. You might not be able to get the quote online; you have to ring around, which you know is the life admin of reading the policies… it’s not a five-minute job.”
The report said climate change and the rising expenses from more frequent weather events are driving up insurance costs.
“Stats NZ figures show the cost of house insurance started tracking up significantly in 2011, again in 2017 and once more from 2022 to 2023.
“These spikes are probably due to the impact of natural disasters on insurers. In 2011, Christchurch experienced a devastating earthquake, with $21 billion worth of insured losses. 2017 was declared the worst year on record for weather-related losses, with $242 million paid out by the insurance industry.
“This has since been eclipsed by the Auckland Anniversary weekend floods and Cyclone Gabrielle in 2023, with the losses that year currently calculated as costing $3.8 billion.”
Styles said that for insurance to stay affordable and accessible, the industry requires effective climate adaptation laws and a supporting framework.
“Such a framework would clarify which homes are at risk and whether mitigation, adaptation or retreat is the best way to keep people and property safe. Without such a framework, insurers might retreat from insuring homes, communities, cities and even entire countries if the risk proved too great.
“Without serious intervention in the form of a government-led adaptation framework, with cross-party support, it’s possible that many New Zealanders will not be able to get insurance by 2035.”