Around one in 10 of Tower's home insurance customers are set to see a rise in the flood risk portion of their premiums as the insurer moves to a pricing model based on the individual risk of a property being damaged through flooding.
The NZX-listed insurer already charges higher premiums to insure higher earthquake risk properties after moving to this model in 2018.
Now it has developed a flood-risk version using analysis from global catastrophe risk assessor Risk Management Solutions based on local data to allocate a risk rating of low, medium or high flood risk for every property in New Zealand.
That will see 90 per cent of its customers who live in a lower flood risk area have a reduction in the flood risk portion of their premium of an average of $25 a year.
But around 10 per cent will see a rise - the majority of which will be less than $50 a year - in the flood risk portion of their premium. Although hundreds of customers could see increases of several hundreds of dollars upwards to $1000 depending on the risk level, size and location of their property.
Blair Turnbull, Tower chief executive, said it wanted to help people better understand the possible risks from flooding and also natural hazards to their current property and those they may be considering buying or building on.
"We don't want to alarm people and have them stressed about it - 90 per cent of homes will be in a lower risk area for flood.
"But what we do want to do is make sure people are aware and once you become aware then you have got options - you can do things - councils, government can do things - whether that is elevating your home, putting different drainage in, putting flood walls in or making sure we don't build on wetlands in the future."
Turnbull said in the last year there had been flooding events in Northland, Napier, central Otago, big storms in Canterbury, Westport, west Auckland and more recently Gisborne and the East Coast.
"All of that is disruptive for communities, disruptive for customers and it's also costing a lot."
He said it was not just an issue over the last 18 months but data from the Insurance Council of New Zealand dating back to the 1960s showed there was an increasing trend line in terms of natural disasters of which almost half were based around floods.
The rest were storms - hail storms, tornadoes or coastal storms.
"But we are particularly focused on floods which are close to now half of all those large natural disasters and increasing."
He said it was not just the frequency of the floods but the severity of them.
In the last 10 years the cost of flood damage was equivalent to the previous 45 years.
"The storms are becoming more frequent and also becoming more severe in terms of the impact they have."
He said that was a reflection of more homes but also homes that were increasingly around flood-prone areas.
"We all love the water, we love to be beside the water but we haven't necessarily always had the flood protections as a result of that."
Turnbull said there were a few hundred customers facing higher price rises that it would work individually with.
"We will be calling them, we will be walking them through that they are in a high or very high risk prone area for flooding and will be walking through options with them."
Those options could include increasing the excess, or smoothing out the increase over a number of years.
"In some cases a customer may decide they are better off with another specialist provider who can give them better cover than us.
"We hope that is not too many cases because we don't want to lose customers. But at the same time we would rather have that than homes where they can't afford insurance or worse still they don't take insurance out."
Turnbull said the change did not mean it would not insure new customers with high flood risk properties.
"We don't have embargo areas as such but what we do, is have risk-based pricing.
"We will provide you cover but it is going to cost more in terms of premium."
He said New Zealand had 96 per cent insurance cover of all homes. "We don't want people not to have insurance cover."
But likewise it did not want to see those who lived in low flood risk areas subsidising those who had homes in high flood risk areas.
Anyone wanting to use the new tool to understand their risk profile better could request a quote from Tower or log into their My Tower portal.
This showed people their property's individual results for flood insurance risks, as well as a breakdown of other pricing elements.
For existing customers, any changes to pricing would start at their next renewal date.