Are New Zealand homes becoming uninsurable?
The natural disasters of the past years have led to a troubling trend in New Zealand: some homes in the country are becoming uninsurable.
In recent years, New Zealand faced a series of natural disasters, among which are the devastating Canterbury earthquakes to the more recent Cyclone Gabrielle.
Insurance companies now say that the risk that is associated with insuring properties in certain high-risk areas is becoming too great. This leaves homeowners in vulnerable positions.
The financial implications of natural disasters prove to be too costly. Insurers are therefore increasingly hesitant to offer coverage.
This issue is, however, not unique to New Zealand. The United States also grapples with similar challenges in regions prone to natural calamities, like wild fires or hurricanes.
How are insurers responding to the growing risk of natural disasters?
Insurers in New Zealand and the U.S. explore alternative models to address the increasing risks posed by natural disasters.
Traditionally, insurance policies would cover losses based on the extent of damage caused by an event.
However, the financial burden of frequent and severe disasters has led insurers to rethink their strategies.
In New Zealand, insurers might soon need to “treat consumers fairly,”. This could potentially compel them to offer coverage across the country despite the risks in certain areas.
Meanwhile, innovative options like parametric insurance gain traction. With parametric insurance the insurer pays out a predetermined sum based on the occurrence of a disaster.
These approaches could help mitigate the financial strain on both insurers and homeowners.
What can homeowners do to secure their homes?
As the risk of natural disasters increases, homeowners in both New Zealand and the U.S. must take proactive steps to secure their properties and insurance coverage.
This includes understanding the limits of their current policies and exploring additional coverage options where available.
For example, in New Zealand, the Natural Hazards Commission provides automatic cover for certain natural disasters. However, it is crucial for homeowners to know what is and is not covered.
Additionally, people should disaster-proof their homes. They can either reinforce structures or take steps to mitigate flood risks.
This will not only protect properties but may also lead to lower insurance premiums since the protection measures reduce the property risk.
As natural disasters become more frequent, homeowners must be informed and prepared to navigate the evolving insurance landscape.