The country has mostly dried out, but the impacts of devastating floods earlier this year are still keenly felt. As insurers scramble to support their customers, they’re also working on new pricing models based on an individual home’s risk of flooding.
Pockets of the country are still reeling from the impacts of devastating floods earlier this year. We’ve been working with affected property owners and tenants as they get back on their feet and into habitable homes and on with their lives.
It’s been brutal.
Insurance companies are sweating:
20,000 insurance claims exceeding NZ$1 billion were lodged immediately after the Auckland floods, according to the Insurance Council of New Zealand. The mind boggles at total claims across the country once Cyclone Gabrielle finally dissipated.
Insurers are scrambling to support their customers, straining under the sheer volume of claims that must be processed. Some are hiring extra staff from overseas and warning that it may take years to settle claims.
In the meantime, people are thinking longer term and accept that insurers are re-evaluating risks and the broader impacts of climate change.
Prone to flooding:
The country’s first national climate change risk assessment, published in 2020, identified 675,500 New Zealanders as living in areas prone to flooding. A further 72,065 were living in places at risk of the most dramatic effects of sea level rise.
It’s clear that there are homes, suburbs, and even entire towns in places where they shouldn’t be.
IAG, the country’s largest insurer, says 20,000 homes across the country are at severe risk of flooding. They’re helping the government identify which flood-damaged houses should be written off for good.
Premiums go up:
Recent flood events and climate change data are likely to drive a significant spike in insurance premiums.
Many houses will become significantly more expensive to insure as the costs of recent past events are tallied. Worse, other houses will exceed risk thresholds applied by mainstream insurers, forcing property owners to seek out much pricier insurance from specialist underwriters. Some properties may even be uninsurable, which is what happened after Wellington’s 2016 earthquakes.
These changes have been on the cards for some time. Last year, Tower Insurance introduced a new pricing model based on an individual home’s risk of flooding.
Rising premiums are one thing, LIM reports are another:
Insurers are working with Government on a change that will require councils to include significant risks on the Land Information Memorandum (LIM) reports of individual properties.
The move coincides with a new bill called the Local Government Official Information Amendment Bill, which sets out requirements for councils to make LIM reports clear and concise, including clearer information about risks, such as flooding and earthquakes, and related factors, like poor drainage.
This will spook some property owners for its potential to impact their property’s value.
If you’re looking to buy, or even upgrade an existing property, think hard about potential risks and future value, especially if your property is in a high-risk zone.
Beware of the optimism bias.
Four in five of us are unrealistically optimistic. We are wired to distort our perceptions of reality so that we can maintain our mood and an even keel. Rose-tinted glasses are a dangerous thing.
We don’t do rose tints at Goodwins. We understand markets, selling, and buyer mindsets. Call 0800 GOODWINS for a no-nonsense assessment of your property.