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Cyclone Gabrielle flooded the Esk Valley home of Mackenzie Wiig and fiancé Michaela Tait. First published in Aug 2023. Video / Warren Buckland
Residents of Hawke’s Bay knew it might come, but nobody could predict exactly how big the insurance premium hike would be after Cyclone Gabrielle.
Even those whose homes were not flooded or damaged during the extreme weather of February 14, 2023, have been confronted with insurance bills that have increased more than 60 per cent in some cases as they renew their policy.
But, as reporter James Pocock discovered, there are broader factors at play.
House insurance premiums had increased more than 30 per cent over nearly a year, from September 2022 to July 2023, for some parts of New Zealand, according to price monitoring data provided to Treasury.
The data showed a relatively smaller increase over the same period for Hawke’s Bay of about 11.5 per cent, from $1732 to $1933, in the average cheapest insurance premium.
That indicated Cyclone Gabrielle had not especially impacted insurance pricing in the region relative to the rest of the country, but Hawke’s Bay residents have recently noted a sharp jump in their premiums as policies are renewed for 2024.
Despite that, his insurance premiums with Tower Insurance increased from $3100 annually to $4900, or a 58 per cent increase.
“I kind of understand it, you have got to get your money from somewhere, but I don’t know how they calculated.”
Porter said he knew of others who lived in completely unaffected properties that faced similar or larger hikes.
Hawke's Bay residents have noted a spike in their insurance premiums this year, but insurers say the increase is not only in Cyclone Gabrielle-affected areas. Photo / NZME
Heather Vesty, a resident of the Napier suburb Te Awa, said her combined car, contents and home insurance with Ando Insurance had increased by $2000, from about $5000 to $7000.
Vesty’s home was not flooded during the cyclone, but the last two insurance premium hikes combined mean her premiums have about doubled during the past two years.
“There were small increases when we first moved there,” Vesty said.
“This is definitely the biggest increase we have had.”
Tower chief underwriting officer Ron Mudaliar said a variety of factors contributed to the increases some Tower customers in Hawke’s Bay saw, like inflation and increased costs from reinsurers, which is insurance for insurance companies, both of which were common after a large event.
“Part of our commitment to fair and transparent insurance means we take a risk-based approach to pricing, where Kiwis only pay for the individual risks their properties face. While not the primary reason for pricing changes, in some cases customers’ individual flood risk ratings were updated,” Mudaliar said.
A Vero Insurance spokeswoman also cited inflation and increasing reinsurance costs as factors contributing to an increased premium, but added that the increases were not specific to areas affected by Cyclone Gabrielle.
“Cyclone Gabrielle was a devastating natural hazard event, particularly for those in Hawke’s Bay and surrounding regions, and our hearts go out to everyone impacted by it. A large portion of the premium customers are seeing now, though, are due to increases in the portion of their premium that covers other claims costs and reinsurance, which also includes things like the earthquake risk in the region,” the spokeswoman said.
“Our current underwriting response to flood is based on the risk of flooding, so not based on the impact of last year’s events, but rather the risk of future flooding. We calculate this using the same methods we use to assess flood risk across the country.”
Alex Johnston, FMG’s chief insurance officer, said several factors went into how FMG priced its insurance including personal needs, circumstances, what was insured, where the client lived and the risk associated with that location, costs to run the Mutual including reinsurance costs, increasing regulatory requirements and levies.
“It’s also important to note that we have also seen the impact of inflation across the claims we pay, an example being the increase in building and equipment costs, meaning an increase in average claim costs,” Johnston said.
She said FMG had settled over 90 per cent of all claims from last year’s events, but had made a loss of $15.7 million in the past year and needed to adjust prices across the country to remain viable.
FMG was working with clients to help by offering options such as changes to excesses and different payment plans, and the organisation was also looking at ways to reduce its expenses, he said.
James Pocock joined Hawke’s Bay Today in 2021 and writes breaking news and features, with a focus on environment, local government and post-cyclone issues in the region. He has a keen interest in finding the bigger picture in research and making it more accessible to audiences. He lives in Napier. james.pocock@nzme.co.nz
