Insurance Industry Set to Announce Major Changes to House Cover
Posted by Fleur Revell
Media Release: Canterbury earthquakes influence the cost of home insurance.
Media release; Home insurance policies about to change considerably
Major changes which will impact heavily on the cost of home insurance policies are expected to be announced shortly. The announcement comes after months of uncertainty following the Canterbury earthquakes.
The changes will mean that getting and renewing residential house cover will be more complex initially, but will have long-term positive benefits for the market, says James McGhie, Managing Director of private insurance brokerage Apex General.
These changes are really just about aligning New Zealand with the rest of the world and bringing us closer to international standards of best practice. We are the last country in the world where homeowners can pay for their house cover by square metre, without taking into account any other crucial factors for example, thousands of dollars of upgrades to the property, new driveways, retaining walls, etc.
These new changes in domestic house insurance mean essentially that people pay for the true value of their homes, which makes it more equitable for everyone and more sustainable for our small insurance industry in the long run,” he says.
The changes, which McGhie says will start either from the end of April or at renewal time depending on the insurer, are something New Zealanders have seen before as they mirror how companies used to cover homes about 20 or 30 years ago.
We’ve already started guiding our clients through the process at Apex, but what we’d like to tell other people in the market for insurance is that whereas in the past they may have only been asked for the size of the house, now a far more detailed description of the home will be the norm.
What a big natural disaster like the one that happened in Christchurch shows us is the basic unfairness of the current house insurance market, where as long as you get the square metre size of your home correct, it will be rebuilt regardless of cost to the insurer,” says McGhie.
“The new changes mean that home owners will now be insured for the actual cost it will take to rebuild the house. So it’s just small things, like remembering to ring your insurer if you make renovations to your home, to guarantee that it’s covered by your policy in the event that you need a total home rebuild that kind of thing,” he says.
McGhie says the changes will be unique to each group of homeowners, with some even finding that their policies will become cheaper.
Basically, it means that what you are now paying for is the true cost it will take to rebuild your home. The old model was unsustainable, the cost of rebuilding a $1.8m home in a posh suburb of Auckland compared to that of a family home in a more modest suburb are completely different, and yet both sets of homeowners under current policy would pay the same amount for their cover. Now they’ll pay for what their homes are actually worth.”
So the message we want to put out there is for people to be prepared for these changes, and if they need help to understand the process and get in touch with their insurer or a good broker,” says McGhie.