Insurance hikes by Tower come with underlying motive - report

The recent round of premium hikes by a New Zealand insurance company could be seen as attempts to freeze out high-risk properties, it has been suggested.

Earthquake claims advocate Mel Bourke, in a report from Radio New Zealand, claims Tower insurance’s decision to use a risk-based price model was a sign that the insurer was trying to price itself out of the market.

The Cantabrian, who is also insured with Tower, reportedly said that a truly risk-based model has to take into account not just earthquakes but also other important factors in New Zealand, which is not currently being applied.

“If we look [at] the underlying motive, to me, it looks like removing a certain property type off its books that it sees as a risk to its current financial position,” she told RNZ.

Bourke added she could relate to the frustration of Tower’s customers, such as Roy Howell. Howell, whose Strowan property suffered minor damage in the quakes, told the publication his insurance premium rose by 440%, from $2,300 to $12,843 a year after Tower decided his property was at a higher risk from earthquakes.

“I would put the house that we own in a category that’s not hugely dissimilar [to the property in Strowan]. It’s on TC3 land. In theory, it would be a high risk,” Bourke highlighted.

“It’s kind of interesting how Tower would make its decision as to which property [should incur insurance premiums of $10,000 compared to $3,000 a year].”

Consumer New Zealand’s head of research Jessica Wilson, meanwhile, reportedly said it looked as though Tower was sending a clear message to Howell - but hoped other companies would not follow suit.

“Premium increases of $10,000 are basically the insurer saying it doesn’t want to provide cover in this area,” Wilson added.