Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 


Survey Illuminates Problem of Widespread Home Underinsurance

Media Release March 2014


Consumer Survey Illuminates Problem of Widespread Home Underinsurance


More data about an incipient crisis in the national housing market is emerging, with a survey of 459 older New Zealand homeowners showing that two-thirds mistakenly believe they are insured for the true cost of rebuild. In fact, a group of quantity surveyors says, its own assessment of more than 25,000 residential properties has found that nearly all homeowners are underinsured, most by around 25% of rebuild cost and some by up to 50%.

The responses to a range of questions show that homeowners are largely uncertain about the effects of – and risks posed by – recent changes to insurance guidelines.

The survey was conducted in December 2013 by the lifestyle website for 50-plus New Zealanders, grownups.co.nz. Ninety-six percent of respondents reported having home insurance, and 82% own their home freehold. Most – 62% - indicated that they are confident they are insured for the true cost and value of rebuild, while 9% believe they are overinsured and 29% underinsured.

The findings follow the recent warning by Construction Cost Consultants about the extent of home underinsurance following the issuance in July 2013 of new guidelines requiring a ‘sum insured’ to be nominated by homeowners.

The company noted that the majority of homeowners who have cover are at least 25% short of the rebuild cost, having accepted the default sum provided by banks and insurers. It further estimated that at least $167 billion worth of residential property is currently not insured for rebuild.

Based on data it has received from its partners in the financial services sector, including many major banks and insurers, Construction Cost Consultants says 93% of homeowners who have renewed their policies since July 2013 have accepted the default sum provided by their insurer. Of the remaining 7%, most are using an online calculator to nominate their own sum, and a small minority are seeking assessments from property valuers or quantity surveyors.

Gary Caulfield, managing director of Construction Cost Consultants Residential, says the survey results show the gap in understanding that is putting Kiwi homeowners at risk.

“The new guidelines have only been in place for six months, and in our view there has not been a sufficient degree of education to ensure homeowners are covered for the full cost of rebuild. Insurers and banks are doing their best in response to new demands from reinsurers, but to put the onus back on homeowners, few of whom have the necessary expertise to assess their own number correctly, leaves an enormous amount of personal wealth unprotected.”

The survey responses also indicated that there is no first port of call for advice on the new requirements. When asked who they would talk to in order to understand the new home insurance guidelines, answers ranged from valuation companies and insurers to friends and family members, builders and architects, real estate agents, financial advisers and online calculators. And while 83% said they know what a quantity surveyor is and does, only 57% reported knowing the difference between a QS report and a bank valuer report for their home.

Fact Sheet

Further findings from the grownups.co.nz survey:
• When asked whether they had accepted the default sum option in their last insurance policy renewal package, 11% of survey respondents said yes and 44% no, and another 44% weren’t sure;
• When asked whether they would accept a ‘default sum’ if it were provided, 9% said yes, 40% said no, and 52% said they weren’t sure;
• Fifty-one percent of survey respondents said knew how to measure their home for a valuation with a tape measure and calculator, and 49% did not. Overall, they were averse to the online calculators available, with 65% believing calculators do not provide an accurate cost of rebuild.

Before engaging a quantity surveyor, a homeowner should request evidence of:
• Professional qualifications – NZIQS (New Zealand Institute of Quantity Surveyors) membership, QSI (Quantity Surveyors Institute), RICS
• Professional indemnity insurance;
• Track record / experience in the field;
• Format of insurance report (ie is it approved by ICNZ);
• Warranty and guarantee of insurance report for a fixed term (Construction Cost Consultants guarantees reports for two years from date of issue);
• Content of insurance report and what it will provide, ie detail breakdown of costs.

Construction Cost Consultants’ most frequently asked questions:

Will my insurance premium go up? This depends on whether the insurance report finds that the current level of cover needs to increase to reflect the cost of rebuild. On average, every additional $50,000 worth of cover costs approximately $75.
How often am I required to seek an assessment for insurance? Insurance policies must be renewed annually. However, insurance reports by Construction Cost Consultants cover a two-year period.
How long does it take to get a report? The time from request for survey to issue of report is approximately 10 days.
Will my insurance report / increased insurance premium affect my rates? No. The information is solely for the person who orders the report, and is not provided to any third party by Construction Cost Consultants.
Does the survey include decks, outbuildings, swimming pools and so on? Yes. Everything except land is assessed for construction cost and included in the report.


ends

© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

Housing: Affordability Drops 14%, Driven By Auckland Prices

Housing affordability across New Zealand fell 14 percent in the year ending November 2014, with Auckland’s lack of affordability set to reach levels it hit during the height of the global financial crisis, according to the latest Massey University Home Affordability Report More>>

ALSO:

The Dry: Fonterra Drops Forecast Milk Volumes By 3.3 Percent

Fonterra Cooperative Group, the worlds largest dairy exporter, reduced its milk volume forecast for the 2014-2015 season by 3.3 per cent due to the impact of dry weather on production in recent weeks. More>>

ALSO:

Strike: Lyttelton Port Workers Vote To Escalate Dispute

Members of the Rail and Maritime Transport Union (RMTU) at Lyttelton Port today voted to escalate their industrial action. Around 200 RMTU members have been operating an overtime ban since 17 December and today they endorsed a series of full withdrawals of labour at the port. More>>

ALSO:

Scoop Business: NZ Dollar Falls To 3-Year Low As Investors Favour Greenback

The New Zealand dollar fell to its lowest in more than three years as investors sold euro and bought US dollars, weakening other currencies against the greenback. More>>

ALSO:

Scoop Business: NZ Govt Operating Deficit Smaller Than Expected

The New Zealand’s government’s operating deficit was smaller than expected in the first five months of the financial year as a clampdown on expenditure managed to offset a shortfall in the tax-take from last month’s forecast. More>>

ALSO:

0.8 Percent Annually:
NZ Inflation Falls Below RBNZ's Target

New Zealand's annual pace of inflation slowed to below the Reserve Bank's target band in the final three months of the year, giving governor Graeme Wheeler more room to keep the benchmark interest rate lower for longer.More>>

ALSO:

Get More From Scoop

 
 
Standards New Zealand

Standards New Zealand
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news