AA Insurance puts temporary restriction on new home insurance policies in ‘a small number of postcodes’ after reaching its maximum exposure limit for seismic risk in these areas, its head of underwriting says

General insurer AA Insurance has put a temporary restriction on issuing new home insurance policies in “a small number of postcodes where there is very high seismic risk”, its head of underwriting says.

This comes with AA Insurance having reached its maximum exposure limit for seismic risk in these areas.

“Limiting new policies in high-risk areas is never something we do lightly, it reflects our ongoing risk assessment and responsible approach to managing exposure in high-risk areas,” AA Insurance’s head of underwriting Dee Naidu says.

"At present, AA Insurance has a temporary restriction on issuing new home insurance policies in a small number of postcodes where there is very high seismic risk. These temporary restrictions were introduced in April 2025. We regularly review areas where temporary restrictions are in place, and if our exposure reduces, we intend to reopen to new customers."

Some postcodes impacted are in Canterbury, specifically Lincoln and Rolleston, according to Star News.

AA Insurance is a joint venture between Vero Insurance New Zealand Limited, which is owned by Suncorp, and the New Zealand Automobile Association.

The general insurer says it looks after over 560,000 customers with more than 1.1 million policies. And in its 2025 financial year, Naidu says AA Insurance paid out $532 million in claims.

AA Insurance uses “expert risk modelling, third-party data, and our own claims history” to assess the likelihood and potential impact of natural hazard events at specific addresses across the country, Naidu says.

"We are unable to share more specific information on our modelling approach as this is confidential for commercial reasons."

Naidu says existing customers are not affected and could continue to renew their policies as usual, provided they met AA Insurance’s standard underwriting criteria.

"Managing risk exposure is standard practice across the insurance industry," Naidu says.

Insurance under the microscope

Just last week, advocacy organisation Consumer NZ released a report looking into insurance, the consumer experience and climate change.

Academics told Consumer NZ the country has until 2040 before we start to see some insurers exiting Aotearoa. They also suggested some of the country’s main centres could see insurance retreat by the end of the decade.

Alongside this, the report found consumers have a lack of trust in the insurance industry and there was a lack of transparency when it comes to risk-based pricing.

In the report, Consumer NZ's research team leader Rebecca Styles speaks to Labour’s Christchurch Central MP Duncan Webb - a former law professor and former Minister of Commerce and Consumer Affairs - who developed an interest in insurance following the Christchurch earthquakes.

Webb says there’s no avenue for people to contest insurance costs and while insurers are using “sophisticated modelling now”, he doesn’t know if the modelling is true or not.

“If … your insurer says, for Wellington, we’ve done all the modelling, everyone’s premiums are going up by 5% as a result … plus inflation and the model’s wrong, then there’s a problem there: it’s overpricing. But there’s no real way to challenge that.”

While insurers offered some general information about this, the report says there was a “reluctance,” with many saying they couldn’t or don’t share natural hazards data with customers due to it being commercially sensitive.

The report asks: “Given the rise in risk-based pricing, how do customers know their insurer is using the right data to calculate their property’s risk and hence the premium price? At what point does a customer’s right to know override commercial interests?”

“Should customers be able to challenge the data insurers use? Do we need more transparency and is that something the insurance industry supports?”

Severe impacts if insurance becomes a luxury

There’s potential for more transparency in the future and that should come out of the Government’s climate adaptation framework plans, says chief executive of the Insurance Council of New Zealand - Te Kāhui Inihua o Aotearoa (ICNZ) Kris Faafoi in the report.

“But the insurer spends a considerable amount of money to get some of the data and obviously that’s commercial information that they want to keep tight to have a competitive advantage.”

As the average cost of house insurance has increased and insurers move towards risk-based pricing, this was flowing through into the premium prices insurance comparison website Quashed was seeing.

The average New Zealand household with a car, contents and home insurance policy could now expect to pay over $5000 a year on their premiums.

Styles says: “If insurance becomes a luxury only available to a privileged few, the impacts on communities, our economy and society will be severe.”

“If we don’t act now, it’s entirely possible that many New Zealanders won’t be able to get insurance at all by 2035.”