Because the chance of your home being damaged by a natural disaster, like an earthquake, is different depending on where you live, we consider the risk of this happening at your specific address when we calculate both house and contents insurance premiums. We call this risk-based pricing.
If you live in an area with a greater risk of damage from a natural disaster, you’ll pay more than if you live in a lower-risk area. If you live in a low-risk area, you won’t be subsidising the cost for people in higher-risk areas.
What you pay could go up or down depending on where you live as we continually review the risk at each address.
Why we do this
We introduced risk-based pricing because we believe it's the fairest way to distribute the costs we face as an insurer. The cost to insure a property can differ a lot between regions as some are more likely to face natural disasters than others. For example, Wellington is much more likely to experience an earthquake than Whangarei.
Recovery from earthquakes and other natural disasters can cost billions of dollars. If a disaster happens, we need to make sure we can pay out to those customers affected and still have money to pay for day-to-day claims. To do this, we buy our own insurance. This is called reinsurance and it's included in the price of our premiums.
Our new way of pricing more accurately reflects the cost of providing natural disaster cover at each address and means locations that have a higher chance of suffering damage from natural disasters will likely pay more than locations where the chance is lower.
How we price insurance
We use various sources of data to assess the level of risk each address faces, looking at factors like soil type and how close it is to an earthquake fault. We combine this with information about the building itself such as its age, number of stories, construction material and its sum insured.
To help us better understand earthquake risk in New Zealand, we’ve partnered with Risk Management Solutions (RMS) – one of the world’s leading catastrophe modelling companies. RMS earthquake models are built using advanced technologies, science, and data, including lessons from historical events, geologic data, ongoing global research and damage statistics.
Assessing properties with this level of detail means earthquake damage risk can vary from one address to another, even for properties on the same street. These differences are reflected in our premiums.
Learn more about RMS and its methodology