Extreme weather adds to New Zealand insurance premiums

Sunday Star Times (New Zealand): There were red faces last week at Tower Insurance's call centre after an employee told a customer her monthly house and contents premium had gone up to pay for building costs and "climate change". When the customer contacted Tower's head office to query the explanation, she was told it was wrong.

Chief executive Rob Flanagan says although extreme weather conditions are contributing to higher premiums, the jury is still out on the cause and Tower is not adding a surcharge to premiums to pay for climate change. But insurers say in some cases extreme weather has already added more than 20% to insurance bills.

"There's no question that the incidences of major weather-related events have increased over the past five to 10 years," says Flanagan. "You can argue whether that's global warming or climate change or whatever. "The reality is that this happens in cycles over many years."

The cost of claims relating to floods, storms, tornadoes and snowstorms is rising. Insurers paid out $96.25 million in 2007, $52.04m in 2006, $65.18m in 2005 and $161.03m in 2004, compared to the annual average of $27.69m between 1997 and 2003. All major insurers have hiked home insurance premiums in the past two years and Insurance Council chief executive Chris Ryan says prices are likely to rise further. "It's the beginning of a new awareness of risk by insurers... The climate has become more volatile and we're getting experiences of extreme weather patterns, but it also reflects that people are living in more high-risk areas."

It's an international trend that is hitting Australia even harder, Ryan says. Increased demand for homes on coastlines results in more claims when floods occur. NZI, State Insurance and AMP told the Sunday Star-Times they planned to hit homeowners harder in flood-prone areas, but were yet to work out exact increases. Most insurers consider geographical location when calculating premiums, but this will increase as GPS data and more precise mapping information becomes available….

Mt. Ruapehu, New Zealand, NASA Earth Observatory, Wikimedia Commons