Because the chance of your home being damaged by a natural disaster, like an earthquake, is different depending on where you live, we now consider the risk of this happening at your specific address when we calculate your house insurance premium.
This means properties with a higher chance of experiencing damage from this type of event will pay more than those with a lower risk. We call this address-based pricing.
Why we’ve changed
We’ve made this change because we believe this is the fairest way to distribute the costs we face as an insurer. 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 is included in the price of our premiums.
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.
In the past, regions at greater risk did pay more for house insurance, but this did not reflect the true expense of providing cover for these properties.
Our new way of pricing more accurately reflects these costs 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 house 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 and construction material.
As part of our change to address-based pricing we’ve partnered with RMS (Risk Management Solutions), one of the world’s leading catastrophe modelling companies, to help us understand earthquake risk in New Zealand. RMS earthquake models are built using the most 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.