|
Climate Risk and Home Insurance: Tips To Know
Over recent years, the impacts of climate change have become increasingly evident, not only through dramatic events such as hurricanes, wildfires and rising sea levels, but also in a way that affects affordability and availability of insurance. New Zealand home policy owners have experienced and are facing rising premium cost. One of the reasons for the increasing cost is from the climate change.
Insurers and reinsurers have faced unprecedented levels of claims in recent years due to the impacts of climate change. Increased claims lead to increased costs that are ultimately passed down to policy-holders.
In some countries, insurers are pulling out of natural hazard cover when they deem the risks are too high, leaving home owners and businesses without protection. We are lucky in New Zealand as we have one of the longest-running natural hazard insurance pooling schemes in the world. It is now managed by Natural Hazards Commission (NHC, formerly EQC). All home policy owners pay a levy set by the Commission based on world-class research and modelling of risks and costs. The levies are then pooled in the Natural Hazard Fund, which is used to pay out on claims for residential damage, up to a cap determined by legislation.
By taking away the first layer of natural risk, the NHC ensures NZ to have a stable and readily available private insurance market. As a result, New Zealand has the highest home insurance rate, proximately 95%, and is one of the most insured and protected countries in the OECD.
How are you covered?
The Natural Hazards Commission provides cover for up to the first $300.000 of damage caused to homes by earthquakes, tsunamis, landslides, volcanic and hydrothermal activity. Damage above $300,000 is covered by private insurance policies.
How to manage risk?
Firstly, we need to understand that climate risk is real and will stay with us, as New Zealand is a country with a lot of rains and quakes. We need to incorporate natural hazards risk in our own financial planning.
Secondly, we need to make sure that we are adequately covered, reducing the gap from NHC and private insurance.
Thirdly, we can assess our risk by identifying the natural hazards that could affect our properties, such as earthquakes, floods or landslides. Natural hazards portal enables us to see if our current or prospective property has had previous natural hazards claims.
Fourthly, we can mitigate climate risks by taking proactive steps to protect our homes. This might include improving drainage around our properties and reinforcing retaining walls to prevent landslips, securing items to reduce damage during a quake.
Fifthly, our private insurance companies are now managing all natural hazards claims. In case of a claim, policy owners can contact your insurer directly, or to contact NHC. At the same time, you can contact your adviser for assistance.
|
