Insurance brokers in New Zealand have warned that the cost of insuring some buildings could be about to increase by up to 50% as a result of higher earthquake commission (EQC) and fire service taxes, and the changing marketplace caused by recent earthquakes.
According to reports from the country, regions that were hit by earthquakes in the Canterbury, Kaikoura and Wellington areas, are likely to experience increases of 50% or higher.
The Chief Executive Officer (CEO) of NZbrokers, Jo Mason, said that bigger or equal increases were due to a 40% hike in the fire service levy to NZ$106, alongside a 33% increase in EQC coverage, to NZ$200.
In light of and in addition to the higher levies, Mason warned of a general price increase of almost 10% this year, with further rises expected in the years ahead.
One of the steepest increases, amongst other costs, is expected to be for methamphetamine protection on rented homes, explained Mason.
Mason has called for the government and insurance companies to co-ordinate and collaborate, stating that they are “not thinking of the consumer.”
“While the fire service and EQC are essential factors in managing the risk of home ownership, it’s a real concern to see that this increase is going to hit many of those in lower value housing disproportionately higher,” explained Mason.
Commenting on the local market and rate movements, David Crick, Managing Director of Runacres Insurance, said that over the last year or so the industry has witnessed a notable decline in the cost insure in response to insurers’ attempt at growing their client bases, and the entry of new competition.
“We expect that trend to change in 2017 and 2018 with the effect of the increased taxes on insurance and the influence of other market forces coming through such as the Kaikoura earthquakes and limited supply of cover from some insurers,” said Crick.
As an example, Crick explained; “If we take the example of a 1970’s farm house occupied by a farm worker with a replacement value of $230,000 which cost $944 to insure eight months ago, this will rise to $1,478 in November – an increase of 56 per cent.”
