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Wellington Home Insurance: Why Your Policy May Be Changing
Being in Wellington means that you'll be exposed to natural disasters, earthquakes, storms or a devastating tsunami at some point or other. IAG, New Zealand's largest commercial insurance company (which also includes brands such as AMI, State, New Zealand, Lantern and State Insurance) has decided not to provide Wellington home insurance anymore because they're worried about how their policies may affect residents' ability to claim compensation.
They say that it could mean that Wellington residents would lose out on "fair and reasonable" compensation for the loss of possessions that are covered under their insurance policy. They're also concerned that their policies might leave them liable if their property was damaged or destroyed during an earthquake or other natural disaster that may have been insured against.
It's the latest move from the IAG insurance provider, which has become increasingly worried by the effects of the changes to the current market. At the same time, the company is trying to cut costs by merging with two other insurers and cutting hundreds of jobs.
While the company is cutting out a huge chunk of its workforce, it's still confident enough to change its policy - especially because of the potential impact that it could have on its bottom line. The company's plans to stop insuring Wellington homes could ultimately cost thousands of dollars in claims costs for residents who have lost their property during a storm or other disaster.
Home owners who own well-insured properties are particularly concerned. In fact, a group of around a dozen homeowners, including property agents, have formed a consumer group called the Wellington Home Owners Insurance Group (WHOIG) to lobby the government to intervene and force IAG to backtrack on its policy. They claim that the new rules will lead to higher premiums for Wellington home owners and fewer cover options, which could further restrict their financial resources.
WHOIG members argue that their premiums should not increase unless IAG provides concrete evidence that it will not be able to afford to pay out claims. They also argue that the company should consider lowering its payout limit, which could make paying out more money possible.
If the government fails to act, WHOIG says it will start looking for an alternative provider to supply Wellington homeowners with cover, which it says is more competitive. and affordable.
"We want the Government to protect the interests of people in our community," says WHOIG member Pauline Molloy. "This issue isn't going away." She says that it's clear that the company has made the wrong decision and should reconsider.
WHOIG wants IAG to remove all exclusions from its policies and to increase the payout limit. It also wants to have it review the underwriting process it uses, and require home owners to provide receipts whenever they claim, so they can prove that they lost their property.
In response, IAG says that the company is simply following the government's rules in the current market, which states that you must pay only for the cover that's available to you at the time of claim. The company also claims that there are no exemptions to this rule.
"It seems obvious that those Wellington policyholders have purchased more than the limits that are required by law," says Dr. John Cottrell, an independent consultant in residential and commercial property insurance. "That's why they're experiencing so many problems."
WHOIG members argue that this makes sense because they can't know exactly what to expect in the event of a calamity. "If a storm were to hit and damage was to our community, you'd expect that you would have some level of protection."
According to Cottrell, "There are too many questions and too many uncertainties to expect IAG to just be able to cut their costs without compromising the level of coverage available to the public." "And do 2 door cars raise insurance going to charge more, so that they can."