Finance Minister Grant Robertson says he is concerned that some Kiwis are being priced out of the home insurance market.
Speaking at an industry event last week Robertson said living in Wellington he had seen the effect of recent changes by insurers to price an area based on its risks to natural disasters like earthquakes and floods.
In April, Tower announced it would stop cross-subsidising and begin charging people more to insure houses in earthquake-prone areas like Wellington.
That was followed in July by IAG, which owns the State Insurance and AMI brands, also raising premiums for disaster-prone areas.
Robertson said what was happening to the insurance costs for people in Wellington was concerning.
"We are seeing people being well and truly priced out of insurance around risk ratings, approaches that are going to provide big challenges to earthquake-prone areas...and that concerns me."
He also pointed to rising costs of insurance in south Dunedin, where he grew up, due to flood risks.
"I know the way insurers look at low lying areas, below sea level is also going to pose some challenges.
"The whole way New Zealanders think about insurance is being challenged...."
He said the Government would be keeping a close eye on the situation.
"We have got to keep a close eye on that if we want people to continue to look after themselves and their affairs we need products in the market that are actually affordable."
While Robertson admitted it was the right of insurers to increase their premiums if their risk exposure was increased, he said it was important to still talk about the models that insurers were using and the rules they worked within.
"I hear a lot about what re-insurers are saying to insurers and I think you have got to dig into that a little bit."
Robertson said it also left gaps in the market for people to come in and disrupt it with a product that was more affordable and offered better value for affected regions.
He said Wellington apartment developers were facing a particularly challenging time.
Robertson said climate change did not mean that there would be areas that were uninsurable but insurance could pose a significant additional cost for people living in those areas in the future.
That was why the Government was working on plans to tackle climate change.
"This is an area where I think consumers possibly haven't caught up yet with the changes that are happening. As people come to re-insure in places like Wellington and south Dunedin they are going to be surprised."