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Insurance pain for landlords ahead

Landlords – be prepared: insurance costs for some buildings could rise by more than 50% in the months ahead, insurance brokers are warning,

Wednesday, August 30th 2017, 12:00PM

by Miriam Bell

Runacres Insurance managing director David Crick

But it is property owners with lower value dwellings and commercial property owners who are set to feel the most pain.

A combination of increases in EQC and Fire Service levies, the rising cost of cover for meth damage and post-Kaikoura market changes mean insurance on some buildings could soar.

NZbrokers CEO Jo Mason said her organisation’s analysis showed these factors will see the cost to insure some properties increase by up to 56%.

“If we take the example of a 1970’s farm house occupied by a farm worker with a replacement value of $230,000 which cost $944 to insure eight months ago, this will rise to $1478 in November - an increase of 56%.”

The Fire Service and EQC are essential to managing the risk of home ownership, but it's a concern this increase is going to hit many of those in lower value housing disproportionately higher, she said.

Runacres Insurance managing director David Crick agreed the insurance cost increases are likely to be disproportionately larger for lower value dwellings and commercial properties.

He said that over the last 18 months there has been a sustained drop in the cost of insurance, but that trend is expected to change in 2017 and 2018.

“This will not simply be due to insurers hiking their costs. A large part of the increases will come from the rise in the government’s Fire Service and earthquake levies.”

The government’s new Fire Services levies, which came into force at the end of July, have increased from 7.6 cents to 10.6 cents per $100 of insured properties.

While the cost is capped at $106 for residential property insurance, there is no cap for commercial property insurance.

Crick said this was a big issue for commercial property owners as it could mean significant increases in costs.

“A commercial landlord with a property worth $10 million would be looking at a Fire Services levy of $3000, for example.”

But for most residential landlords the rise in insurance costs would stem from the rising cost of meth cover for tenanted properties, rather than the levies.

Many insurers have already imposed penalties and caps on policies which included meth damage cover, Crick said.

“There are capped limits on most policies of $30,000 to $50,000 for meth cover and we have seen cases where the costs of the meth remediation work far exceeds any cover.”

Both Mason and Crick warned the increased costs might be off-putting but the cost of not having adequate insurance could be far higher.

Landlords should be aware the increases are coming, or already happening, and speak to their broker to make sure they have the right level of cover along with the most favourable policy terms.

Read more:

New fire levy rates announced 

Millions being paid for meth claims 

« Reforming the EQCMeth cover demystified »

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ANZ 5.19 4.05 3.95 4.49
ANZ Special - 3.55 3.45 3.99
ASB Bank 5.20 4.05 3.95 4.39
ASB Bank Special - 3.55 3.45 3.89
BNZ - Classic - 3.55 3.45 3.99
BNZ - Mortgage One 5.90 - - -
BNZ - Rapid Repay 5.35 - - -
BNZ - Std, FlyBuys 5.30 4.45 4.35 4.55
BNZ - TotalMoney 5.30 - - -
China Construction Bank 5.50 4.70 4.80 4.95
China Construction Bank Special - 3.19 3.19 3.19
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Credit Union Auckland 5.95 - - -
Credit Union Baywide 6.15 4.95 4.95 -
Credit Union North 6.45 - - -
Credit Union South 6.45 - - -
Finance Direct - - - -
First Credit Union 5.85 3.99 4.49 -
Heartland 6.70 7.00 7.25 7.85
Heartland Bank - Online - - - -
Heretaunga Building Society 5.75 4.80 4.95 -
HSBC Premier 5.24 3.35 3.35 3.35
HSBC Premier LVR > 80% - - - -
Lender Flt 1yr 2yr 3yr
HSBC Special - - - -
ICBC 5.15 3.18 3.18 3.20
Kainga Ora 5.18 4.04 3.95 4.39
Kiwibank 5.80 4.30 4.20 4.64
Kiwibank - Capped - - - -
Kiwibank - Offset 5.15 - - -
Kiwibank Special - 3.55 3.45 3.89
Liberty 5.69 - - -
Napier Building Society - - - -
Nelson Building Society 5.70 4.25 4.15 -
Pepper Money Near Prime 5.64 - 5.44 5.44
Lender Flt 1yr 2yr 3yr
Pepper Money Prime 5.18 - 4.98 4.98
Pepper Money Specialist 7.59 - 7.39 7.39
Resimac 4.50 4.86 3.89 3.94
RESIMAC Special - - - -
SBS Bank 5.29 4.85 5.05 5.49
SBS Bank Special - ▼3.55 3.39 3.89
Sovereign 5.30 4.15 4.29 4.55
Sovereign Special - 3.65 3.75 4.05
The Co-operative Bank - Owner Occ 5.15 3.49 3.59 3.89
The Co-operative Bank - Standard 5.15 3.99 4.09 4.39
TSB Bank 6.09 4.35 4.25 4.69
Lender Flt 1yr 2yr 3yr
TSB Special 5.29 3.55 3.45 3.89
Wairarapa Building Society 5.70 4.85 4.99 -
Westpac 5.34 4.15 4.09 4.49
Westpac - Offset 5.34 - - -
Westpac Special - 3.55 3.45 3.99
Median 5.34 4.04 4.09 4.39

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