‘How are people supposed to absorb it?’: State customer’s 35% premium rise for house insurance

Mike Barton was shocked to see a 35% rise in the house insurance premium State was charging an elderly relative.

“It’s just a huge increase,” said Barton, who volunteers at the Petone Citizens Advice Bureau. “How are people supposed to absorb it?”

Barton helps his relative manage her money life, and worries that other State customers on fixed incomes were getting hit with similar rises.

Other State customers may be getting similar increases in premiums on house and contents policies.

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Two weeks ago, State customer Catherine Godfrey posted on the insurer’s Facebook page that she too had been hit with a 35% rise on her contents policy.

“I have this policy, and have for years. Never had a claim under it or any other contents policy. It is up for renewal this month and my annual premium is increasing by 35%. Just called State, and they could not provide an explanation other than it being a general increase,” she wrote.

“Not impressed. 35% is a big increase for no apparent reason. I’ve been with State for years, but maybe it’s time to shop around for a new insurance provider.”

Barton also tried to understand the rise in premium for his relative who lives in Lower Hutt, but the explanation he has received so far from State, which is owned by Australian insurer IAG, has left him scratching his head.

He was told the country had been hit hard by natural disasters and severe weather events.

“This means that some parts of the country are riskier to live in and insure than others, which means we are constantly reviewing our pricing to ensure customers pay a fair and appropriate amount for their insurance,” State said in a message.

State said it had to change its pricing to reflect these different areas, especially for people who lived “somewhere more prone to earthquakes, flooding or storms”.

These people may see their premiums increase, its said.

State said its pricing models were commercially sensitive and could not be disclosed.

Barton’s relative lives near a waterway, though he said the property was on elevated ground.

Andy Brown, IAG executive manager for pricing, said: “While we can’t comment on individual cases, this could be an example of a customer’s pricing adjusting correctly.”

He said premiums were influenced by factors like where a person lived, the construction and age of your home and the increasing number of extreme weather events.

“It’s important to note that premiums are also affected by the costs to rebuild and repair homes, which have increased significantly in recent years,” he said.

The average cost of building a home in the main centres has risen 21% in the past year, and more price rises are expected, figures released earlier this month by Crown-owned QV CostBuilder show.

Rival insurer, Tower, started individually rating homes for flood risk last year, which resulted in some of its customers’ premiums dropping, while others experienced increases, some so large they were being phased in.

Tower’s chief underwriting officer Ron Mudaliar said: “The change to risk-based pricing for flood risks, which has seen a reduction in the flood risk portion of premiums for 90% of our customers.”

It had so far applied flood risk pricing to 70,000 policyholders, and would have completed the prices by November.

IAG, which also owns the NZI, AMI and Lantern brands, has maintained it has not followed Tower in individual flood-rating homes.

“We have not changed our approach to pricing,” Brown said.

The price paid for insurance includes tax and levies, which do not go to the insurer.

The $3562.71 premium included a $106 fire and emergency levy, a $300 Earthquake Commission levy, and GST of $464.70.