Insurance Council urges government to make decision that ensure insurance is accessible, as Associate Finance Minister David Seymour says Natural Hazards Insurance Levy decision will be made soon

Half of New Zealanders say they would not be prepared to pay $200 more per year in insurance - money that would go towards better funding the Natural Hazards Commission, according to a study.

Meanwhile 21% of those surveyed say they are unsure and 30% say they would pay more. 

The study surveyed 1060 people across the country between June 12 to June 23. The study, done by Talbot Mills Research, was commissioned by the Insurance Council of New Zealand I Te Kāhui Inihua o Aotearoa (ICNZ), the lobby group for general insurers. It comes as the financial settings and levy settings for the Natural Hazard Insurance Scheme have been under consultation. 

Homeowners pay a Natural Hazards Insurance Levy and this is part of their insurance premium.

This money goes into the Natural Hazard Fund and is used to cover claims after a natural hazard event. The fund is also used to buy reinsurance from international financial markets, meet the costs of administering the Natural Hazards Commission (NHC) Scheme and goes towards research and education.

For each natural hazard event, the NHC pays $300,000 towards rebuilding or repairing a residential home. This is called a building cover cap and currently, the Natural Hazards Insurance Levy is 16 cents per $100 of the insurance cover amount.

In January and February, on behalf of Associate Minister for Finance David Seymour, the Treasury consulted with industry professionals, experts and community representatives to look into the financial settings and levy settings under the Natural Hazards Insurance Act 2023.

The options put forward for consultation are to maintain the levy at its current rate of 16 cents per $100 of cover or increase the rate to either 22 cents, 24 cents or 25 cents per $100 of cover.

In the consultation document, 24 cents per $100 of cover is considered the technical levy rate. 

If kept at 16 cents per $100 of cover, this would be $480 per year. If it went up to 22 cents, it would be $660 per year and $720 if it went up to 24 cents per $100 of cover. For 25 cents per $100 of cover, it would be $750 per year.

The $300,000 building cover cap (the maximum amount the NHC can pay for a building claim) was also looked at, with options to keep it the same or increase it to $400,000.

In December last year, NHC chairman Chris Black told Parliament's Financial Expenditure Committee that analysis had shown the current levy is insufficient by 50% and that “it should be 24 cents probably, versus 16 cents on the current settings to break even over time”.

Keeping premiums manageable

When asked if they would be prepared to pay around $200 more per year in insurance to ensure that the Natural Hazards Commission is properly funded to pay claims for future events, ICNZ found 36% of those in households with incomes over $100,000 were more likely to say yes to paying more compared to 29% of those surveyed in households with incomes between $50,000 to $100,000. 

Only 27% of those who make less than $50,000 would be willing to pay more

And at 39% younger respondents - those under 30 - were more likely to say they would be willing to pay more to ensure the NHC is properly funded.

ICNZ chief executive Kris Faafoi says; “we know it’s a difficult time for families, with the cost-of-living foremost in Kiwis’ minds as they manage their budgets”.

“The Government should make a decision to keep insurance accessible."

Taxes and levies already account for around 40% of a home premium, he says.

“Balancing affordability with the sustainability of the NHC Scheme is a shared challenge. The Government, NHC and insurers all have a role to play in keeping premiums manageable.”

‘Two powerful forces’

Associate Minister of Finance David Seymour says; “the Government is working to find the right balance between two powerful forces”.

Seymour says the Government needs to put enough away to cover a future risk like the Hawke’s Bay floods or the Kaikōura earthquake, that would draw on the NHC’s reserves.

“We also need to be mindful of the costs households are already facing from increased insurance.”

“The Government will make a decision to balance these powerful forces very soon,” Seymour says.