Understanding your insurance premium

Your insurance premium can change year to year but it’s not always easy to understand why. To help make this a little clearer, we’ve provided some information about what components make up your insurance premium, and why the cost of cover in New Zealand is increasing.

What makes up your insurance premium

The policy premium (which is the amount you pay us) is made up of several different components: the Tower premium, levies we collect on behalf of the Government, and GST.

To help you understand where your money goes, let’s look at a breakdown of the costs for an average suburban house.



Tax (GST)

Your premium includes a 15% Goods and Services Tax on the amount owing.

Tower Premium

This is the money we use to pay your claims and other costs to run our business. We also need to pay our insurance - it's called reinsurance.

Insurance Premium infographic

An average suburban house in Hamilton


Earthquake Commission (EQC) Levy

This contributes to EQC's earthquake and natural disaster cover. We collect this on behalf of the Government and pay it directly to EQC.

Fire Service Levy

The levy covers most of the work that Fire and Emergency New Zealand does, including putting out fires, educating the public and attending vehicle incidents. We collect this levy on behalf of the Government and pay it directly to Fire and Emergency New Zealand.

Tax (GST)

Your premium includes a 15% Goods and Services Tax on the amount owing.

Tower Premium

This is the money we use to pay your claims and other costs to run our business. We also need to pay our insurance - it's called reinsurance.

Earthquake Commission (EQC) Levy

This contributes to EQC's earthquake and natural disaster cover. We collect this on behalf of the Government and pay it directly to EQC.

Fire Service Levy

The levy covers most of the work that Fire and Emergency New Zealand does, including putting out fires, educating the public and attending vehicle incidents. We collect this levy on behalf of the Government and pay it directly to Fire and Emergency New Zealand.

Why is the cost of insurance going up?

As a responsible business we need to make sure we’re in a strong position to be able to help our customers when they need us the most. The price we charge needs to accurately reflect the costs involved in providing insurance cover. We continuously review our pricing to fairly reflect this, and it means your premium can change too.

Your insurance premium is based on a number of things specific to you such as your claims history and the type of asset you own. It’s also influenced by other components that contribute to the rising cost of providing insurance in New Zealand. We’ve summarised some of them here.

House and Contents Insurance

  • More bad weather and natural events

    Ongoing bad weather and natural disaster events around New Zealand, including “weather-bomb” storms, floods and earthquakes, have resulted in an increase in the number of claims. The Insurance Council of New Zealand forecasts 2017 to be the most expensive year for insurers for weather and disaster related events in nearly 50 years1.

    We have absorbed these costs for as long as we could but need to share these expenses to make sure we collect enough premium to cover the cost of claims.

  • Rising building costs

    Building costs are rising and insurance premiums are changing to keep up with this increase. The latest data from QV costbuilder shows the average cost of building a home in New Zealand’s four largest cities has increased by 25.5% since 20072.

    Regulatory changes can also affect the costs of repairing or rebuilding your home. For example, new Health and Safety regulations introduced with the Health and Safety at Work Act 2015 have meant increased compliance costs for building repairs and more on-site safety requirements.

  • The items we own

    The nature of what we own is changing and items tend to be more expensive. For example, things like smartphones and other tech that were previously luxury items are now essentials for our everyday life. They’re expensive to replace and there’s more opportunity for that type of stuff to get lost, stolen or broken.

  • Natural disaster reinsurance costs

    In simple terms, reinsurance is insurance for insurance companies. Reinsurance cover helps pay for the cost of claims if there’s a major disaster like an earthquake or major flood. Following the Christchurch earthquakes and other natural disasters both in New Zealand and around the world, there has been a significant increase in the cost of reinsurance. This increased cost is reflected in the premiums companies charge their customers.

  • Location of your house

    The cost of providing house insurance can differ depending on where you live. Everywhere in New Zealand is at risk of a natural disaster such as earthquake, flood or storm, but some regions tend to be more prone to these events than others. We regularly review how these events affect each address and then set our premiums to fairly reflect this.

  • Changes to Government levies

    The Fire Service Levy increased on 1 July 2017. The levy is the main source of funding for Fire and Emergency New Zealand (FENZ). We collect this levy on behalf of the Government through most house, contents, and car insurance premiums and pay it directly to FENZ. Read more about the changes here.

    The Earthquake Commission (EQC) Levy increased on 1 November 2017. The Government decided to increase the EQC levy to help rebuild the Natural Disaster Fund which has been depleted as EQC settles its claims from the Canterbury and Kaikoura earthquakes. We collect this on behalf of the Government through House and Contents insurance premiums and pay it directly to the EQC. Read more about the changes here.

Car Insurance

  • The average cost of claims is increasing

    As technology advances, the number of cars with in-vehicle technology (like reversing cameras, windscreen rain sensors, intelligent braking systems etc.) as standard is rising. The presence of advanced technology makes repairs more complex and costly than in the past.

    Plus, labour costs are increasing as greater complexity of repairs means these take longer to complete and require more specialised skills.

  • The type of car you drive

    The frequency and cost of claims for the same or similar vehicles will influence the price of insurance for a particular make and model of vehicle. In addition, makes and models that require specialist or imported parts generally have higher repair costs which also affect your insurance premium.

    The risk of claim for certain types of cars, including older models, can increase as they become more attractive to thieves.

  • The value of your car

    The replacement value of a car can play a role in the price of your insurance, however, you’re much more likely to have an accident requiring a repair rather than a total write off. The premium we collect needs to reflect the cost of repairs including parts and labour. The impact of rising repair costs and accident data for similar vehicles can mean the cost of insurance can go up even as your vehicle ages and the total replacement value starts to depreciate.

  • Your location

    The growth in population and car ownership create more opportunities for car accidents. Our data shows that areas of higher population density have an increased risk of car crashes and this will be reflected in the price of car insurance for your location.

  • Changes to Government levies

    Although an EQC levy is not collected for car insurance, a Fire Service Levy is collected to help pay for the services Fire and Emergency New Zealand (FENZ) provide at the scene of an accident. We collect this levy on behalf of the Government and pay it directly to FENZ. The Fire Service Levy increased on 1 July 2017. Read more about the changes here.


1 Insurance Council of New Zealand. (2017). July weather costs insurers $31m [Press Release]. Retrieved from http://www.icnz.org.nz/july-weather-costs-insurers-31m/.
2Radio New Zealand. (23 June 2017). Spike in cost of building a home – QV. Retrieved from http://www.radionz.co.nz/news/national/333613/spike-in-cost-of-building-a-home-qv