New research from Tower reveals that nearly half (46%) of Kiwis want more information about their property’s exposure to climate-related risks and natural disasters.
The findings also show that an overwhelming 86% of those surveyed believe it’s important to have information about their property’s risk profile.
The research, ‘Weathering change: attitudes to climate risk and resilience in New Zealand’ has been released as Tower expands its risk-based pricing and public risk ratings tool to include landslide and sea surge risks. Tower was the first New Zealand insurer to introduce risk-based pricing for earthquakes in 2018, followed by inland flooding in 2021.
The move aims to bring greater transparency to how climate and natural hazard risks are reflected in Tower’s insurance premiums – and to help Kiwis better understand the risks their homes face.
Tower CEO Paul Johnston says, “As weather events become more frequent and extreme, it’s important that people have information about the risks that could affect their property.
“We want to help people become more resilient to the impacts of climate change and prepared for the future. Like most Kiwis, we believe people should only pay for the risks that apply to their homes, not someone else’s. Expanding our risk-based pricing model is a fair and transparent way to support this.”
According to the research, 70% of New Zealanders think it’s fair for insurance premiums to reflect each individual property’s risk, and 68% support higher premiums for homes more prone to weather or natural disaster damage.
“Insurance is vital for the personal and economic resilience of our communities. Tower’s evolution of risk-based pricing reflects New Zealand’s need to be more prepared. As a nation, we must focus our collective efforts on climate change adaptation, which is what will ultimately help keep insurance accessible and affordable in the long term,” says Johnston.
Tower’s risk-based pricing model uses detailed data and analytics to enable Tower to assess the likelihood that an individual property will be impacted by a certain type of weather event or natural disaster and the estimated cost of repairing damage. It aims to remove cross-subsidisation so that customers only pay for the risks their homes face, not anyone else’s.
Tower is working with some of the world's leading risk management and modelling companies to help calculate detailed risks specific to New Zealand addresses, including Moody’s for flood and earthquake risk-based pricing, Haskoning for sea surge risk-based pricing, and Swiss RE for landslide risk-based pricing.
When Tower launched flood risk-based pricing in 2021, around 90% of its home insurance customers received a reduction in the flood portion of their premium, at an average of around $25 per property.
With the addition of landslide and sea surge risk ratings, over 90% of Tower customers will now receive a reduction in the natural hazards portion of their premium, with average savings of $70 per property. Fewer than 10% of properties (those with higher sea surge or landslide risks) will see an increase in the natural hazards portion of their premiums, proportionate to their level of risk.
Tower will support customers with higher sea surge or landslide risk by smoothing annual increases over a period of up to four years.
