Insurance Australia Group - New Zealand's largest general insurer - says its customers who live in areas prone to natural disasters and severe weather may have to pay more for insurance.

From July 1 the insurer will take more account of risk in its premiums and roll out changes to all its brands as well as the insurance its sells through banks ASB, BNZ, The Co-Operative Bank and Westpac.

Last year it changed the premiums for its AMI and State Insurance customers to take into account risk from earthquakes and floods with some areas seeing an average premium increase of $91 and others an average cut of $54.

But now the insurer plans to roll out its risk-based pricing across the board for all its home and contents policies. This follows a similar move by Tower Insurance in April 2018.


Kevin Hughes, executive general manager customers and consumer at IAG, said the change was being made because it needed 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."

He said in general the top of the North Island was seen as less risky while the East Coast down to Wellington was more risky but he said there would be variations within areas.

Overall the amount of premium revenue IAG collected would stay the same but the mix would be different depending on the risk to the property.

Hughes said New Zealand's environmental risks had evolved over the past few years.

"We need to take more account of those risks, so we can continue to be there for our customers across New Zealand when misfortune strikes."

Hughes said it realised the changes would be a challenge for some customers.

"We will work through this with them.


"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.

"We will continue to provide solutions and work to make insurance as affordable as possible."

Hughes said it didn't lose many customers when it made the changes last year as many of the other players were also moving to risk-based pricing.

The impact from these changes would likely differ across of the platforms it used to sell the insurance, he predicted.

But it was being very proactive to those most affected by the changes.

Jeremy Holmes, an actuary at Melville Jessup Weaver specialising in insurance risk, said it was no surprise IAG was rolling out the risk-based pricing across its business and most insurers were using it to varying degrees now.

"Not every insurer has got on board with this but as more and more do it others will be obligated to follow," he predicted.

Holmes expected there would be specific areas where people faced big increases and some would have to wear the cost as a condition of their mortgage. Those who wanted to sell up could see the price impacted.

He urged people to check whether a property could get insurance and the cost of it before purchasing.

IAG came under fire last month over its moves in Wellington with some claiming it had pulled out of the market.

IAG said it was still operating in Wellington but had changed its focus to servicing existing customers.

Today a spokeswoman for the insurer said it was open for business in Wellington and was accepting requests for cover from new and existing customers, subject to normal underwriting procedures.

IAG has around 46 per cent of the New Zealand general insurance market.

The IAG changes come at the same time as the Earthquake Commission is changing its cover.

From 1 July, EQC will pay up to $150,000 plus GST per residential home up from $100k but will no longer provide cover for contents.

The change will reduce the cost of home insurance but increase it for content cover.