Fences, pools cop big insurance excesses
Insurers are imposing tough new $5000 excesses for some structures on residential properties which will save them millions of dollars in the next big natural disaster.
It will mean homeowners will be paying a large chunk of the cost to fix damage to their driveways, paths, fences and swimming pools caused by an earthquake, tsunami, flood or storm.
It is all part of the huge shake-up in residential insurance policies after the Canterbury earthquakes.
The changes, which are being imposed in insurance policies now as they are renewed and for new customers, are pushing risk back on to homeowners.
Insurers want to be rid of the smaller claims to fences, paths, driveways and swimming pools in natural disasters.
The $5000 excess is being introduced throughout New Zealand and only applies in a natural disaster.
However, one insurer, Vero, has singled out Christchurch and has a higher $10,000 excess on the cover for fences, paths, driveways and swimming pools.
Vero introduced the $10,000 excess in late 2011 and is now bringing in the $5000 excess for the rest of New Zealand.
Pools, fences, driveways and paths are not covered by the Earthquake Commission and are called "non EQC" or "out of scope" claims by the private insurers.
Cantabrians have 64,000 "non-EQC" claims from the earthquakes which are covered under their home insurance policies where the excess has typically been about $250.
These claims could cost insurers $1 billion.
The average size of these claims with one large insurer is about $13,000 each, although they range from hundreds of dollars to tens of thousands of dollars.
IAG, New Zealand's biggest insurer and owner of NZI, State and AMI, defends the $5000 excess as a way of keeping premiums on the main dwelling affordable.
"IAG has looked for ways to offset pressure for even higher increases in order to keep home insurance as available and accessible as possible.
"Adjusting the excess for cover on features of properties separate from the dwelling has provided a mechanism to achieve that," the IAG spokesman said.
A Tower spokeswoman said a $5000 excess would not eliminate all "non-EQC" claims.
However, it would limit those of a more cosmetic nature, for example a crack in a driveway.
That could take as long to assess, determine scope and cost, and manage as a larger more extensive claim.
"This change will also allow insurers to focus their energy and time on those customers who have more extensive damage, rather than as an example a path that's cracked."
If the $5000 excess had been applied for the existing Canterbury earthquake claims, about 25 per cent of them would have fallen under the excess, she said.
Tower is bringing in the $5000 excess from June for new business and from July for policy renewals.
OUT OF SCOPE
The two insurers with the most of these types of claims in Canterbury are IAG and AMI with more than 20,000 each.
IAG has settled about 25 per cent and almost 15 per cent are in construction.
The remaining programmed claims were scheduled to be settled by mid-2014, a spokesman said.
Southern Response, the government company processing the AMI claims, has 28,260 of these claims from 21,480 properties and the company said the numbers were still rising.
Those that had been assessed so far were likely to have a lower average cost than those still to be assessed. The current average cost of these claims for AMI was $13,039.
Tower has 8500 "out of scope" claims with an average cost of $12,000.
It has settled 65 per cent of them, paying out more than $72m to date.
Vero has not supplied information on the number of these claims and the average cost.